Euro Rebounds on Abu Dhabi-Dubai Bail Out Plan

After falling consistently versus the greenback in the end of the last week, the Euro posted a timid rebound and also gained versus several higher-yielding currencies, as concerns regarding Dubai’s debt eased after Abu Dhabi announced a rescue plan for its brother emirate.

The euro benefited today on an Abu Dhabi announcement stating that $10 billion will be used to help Dubai to cope with its debts, paying creditors and contractors, calming down European financial markets, as multiple banks in the bloc have a significant number of loans in the Gulf region, extremely correlated to the Dubai World’s problematic debt situation. The yen was one of the few currencies that managed to gain significantly versus the euro as a manufacturer confidence report in the Asian nation came better than expected, attracting investors to purchase yen-priced assets.

The Dubai bail out offered by Abu Dhabi helped the euro to sharpen its corrective movement versus the dollar after a considerable drop last Friday. European banks have large quantities of money invested in the Dubai region, and as concerns cool down regarding unpaid debts, confidence rose in the region, consequently favoring the European common currency in foreign-exchange markets.

EUR/USD traded at 1.4638 from an opening rate of 1.4610 yesterday. EUR/JPY tumbled to 129.45 from 130.14.

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