| Pound Sterling: Investors shrug off Dubai problems |
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| Written by Mark Deans at MoneyCorp | |
| Monday, 30 November 2009 10:14 | |
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In today's Mark Deans column: Confidence returns to foreign currency markets as UAE central bank offers liquidity. ________________ It was by no means the longest drive of his life but will certainly be the most memorable. The Orlando grapevine has it that Tiger's Thanksgiving kerfuffle came about after he admitted investing half the family fortune in a Swiss mosque-builder and the other half in Dubai real estate. If so, he will not be the only one to have come unstuck with investments in the Gulf. Thursday's clumsy and ill-thought-out announcement, that Dubai World would be asking its creditors for time to pay, festered for four days before local investors could act on the information. When the Emirates' stock markets opened today they did so at prices several percent lower than before the Eid holiday. The Abu Dhabi bourse has a 10% daily price limit and it looked at mid-morning as though it would be needed. Intriguingly, this morning's selling in the Middle East was at odds with the way European markets performed on Friday. Once the inevitable knee-jerk panic was out of the way investors found it surprisingly easy to push aside the Dubai story. The US dollar and the yen lost ground together, to the tune of two and a half cents. Pound Sterling kept pace with the euro, the franc and the Canadian dollar while the antipodean commodity dollars led the way ahead. The rebound of confidence was assisted this morning when the UAE Central Bank in Abu Dhabi said it would make 'special additional liquidity' available to local commercial banks, should they need it to cope with high levels of withdrawals. Today begins with the euro pushing back towards its pre-panic highs against the dollar and Pound Sterling tagging gamely along behind. Figures released at midnight cancelled each other out, with a fourth consecutive monthly rise for Hometrack's house price index offsetting a four-point fall in UK consumer confidence. Money supply data this morning are expected include another incremental rise in mortgage approvals. Other figure today include Euro zone inflation, provisionally expected to have risen back into positive territory in November, Canadian third quarter gross domestic product and the Chicago purchasing managers' index. Editorial pieces in various newspapers have attempted to equate Britain's sovereign debt situation with that of Dubai; excessive borrowings and no capacity to repay them. Investors have so far resisted the temptation to swallow the image but the bears will find it a seductive one. There is nothing positive for Pound Sterling in the default of Dubai World. Beware of fresh revelations that might do it more damage. 
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| Last Updated ( Monday, 30 November 2009 10:17 ) |