UAE Central Bank Promises Liquidity
The US dollar fell against most major currencies after the United Arab Emirates central bank promised liquidity to local banks easing default fears among investors. Risk sentiment remained muted after a Dubai official said that the government would not guarantee Dubai World debt and that its creditors are solely responsible for their actions. The UAE’s central banks actions sparked an Asian equities rally as the central bank promised support for regional banks easing risk aversion and putting downward pressure on the dollar. Camilla Sutton of Scotia Capital stated, “We’ve seen risk aversion decrease from the levels we saw on Thursday. All in all, last week just shows how vulnerable markets are to any fears.”
Dollar Faces Further Decline
The dollar index which measures the dollar against six major currencies was down 0.3% to 74.788 after hitting a fifteen month low of 74.170 last week. US stick futures were promising due to holiday retail optimism and the easing of Dubai fears among investors. The euro vs. dollar rose 0.3% to $1.5016 just short of last week’s fifteen month high of $1.5140.The dollar vs. yen gained 0.1% trading at 86.52 yen. Andrew Wilkinson of Interactive Brokers Group told Reuters, “Should investors sweep the Dubai-related jitters under the carpet, the dollar will likely face a further decline.”
ECB Meeting, US Jobs Report
The dollar is now headed for the longest length of monthly declines against the euro partially caused by a statement by the United Arab Emirates’ monetary authority that said it ‘stands’ behind’ local and foreign banks. Brian Kim of UBS AG said, “Everybody’s coming back to a dollar-under-pressure story. Now that the U.A.E. is coming in to help, people are relieved.” Once again the Aussie and Kiwi dollars gained on the greenback. The Aussie rose 0.7% to $0.9135 while the Kiwi gained 0.8% trading at $0.7154. Later in the week investors will be watching the European Central Bank’s rate decision and the US jobs report due Friday.
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