UAE to Stand Behind Banks

The dollar continued its long term decline against other major currencies after the United Arab Emirates said it would stand behind local and foreign banks to relieve the Dubai World debt crisis. The yen also fell after the Bank of Japan announced they would intervene to mitigate the effects of a stronger yen which has hurt Japanese exporters. On Monday the dollar fell after Asian stocks rose after the announcement by the UAE which pledged support to regional banks and Dubai’s neighbor Abu Dhabi promised support to selected Dubai companies. The actions cooled demand for greenbacks which gained last week on concerns about Dubai’s debts. Dubai World eased investor fears on Monday with an announcement that it intends to restructure.

Japan’s Government Intervenes

The yen fell after the Bank of Japan announced measures to inject liquidity into the Japanese financial system and to keep three month rates at historic lows. Most major currencies strengthened except for the US dollar and the yen as stocks and commodities strengthened. Stephen Gallo of Schneider FX in London said, “The two primary funding currencies, the dollar and yen, are performing badly today versus non-quantitative easing currencies and higher-yielders. The moves by the BOJ caused a big shakeout of long yen positions, and a weaker yen has helped asset price movements elsewhere … as the weak yen to a degree — but maybe not as much as dollar — drives the risk trade.”

US Employment Figures Due This Week

The Aussie dollar was once again a winner and rose almost 1% against the US dollar to $0.9230 after the Reserve Bank of Australia raised rates to 3.75%. The euro gained 0.4% against the greenback trading at $1.5065 on Tuesday. This week the US will release its construction spending and pending home sales report and on December 4th the non farm payrolls and unemployment report will be released. Most analysts expect the reports to show a prolonged recovery for the US.

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