Monday, November 30, 2009
The U.S. Dollar is declining overnight as speculators are downplaying the debt problems in Dubai. Over the week-end, the United Arab Emirates central bank said it “stands behind” the
country’s lenders. This helped to ease concerns that the state owned Dubai World will default on its debt. Traders now believe that this is a local economic problem rather than one with global
ramifications. With these assurances in place, speculators are increasing their demand for higher yielding currencies.
Despite these assurances by the central bank, traders should continue to watch how the Dubai debt situation unfolds. The debt problem has exposed the fragility of the world financial
markets. Although there may be a short-term pick-up in global demand for risk, upside momentum in foreign currencies may slow if investors decide to be a little more defensive in their speculative
plays. Traders may decide to adopt a “trade not to lose” mentality which could create volatile trading conditions as investors will be quick to take profits following any appreciation.
Over the week-end, Chinese Premier Wen Jiabao rejected calls for a stronger …
