On Thursday the dollar is still rising after midday in Europe. There are currently two factors that are driving this rise in dollar. One is the fear of a debt default by Dubai World and the other is talk of intervention by the Bank of Japan and suspected intervention by the Swiss National Bank.
Dollar reversed from recent sharp fall
This has reversed the dollar’s recent sharp fall which took it down to a 14-year low against the yen during Asian trading as investors continued to worry about how long U.S. interest rates will stay at low levels.
The dollar had shown a drop also due to the reports that Russia is planning to diversify some of its foreign exchange reserves into the Canadian dollar.
However, global sentiment shifted sharply regarding US dollar as soon as the news broke that Dubai World, a holding company for the Dubai government, had shocked financial markets with a request for a delay in repayment on about $35 billion of its debt.
Major Indexes dropped down
The fear that this move could be responsible for an actual default led to a swift move out of risky asset markets having the Nikkei Index closing 0.6% lower, the Shanghai Composite Index had also shown a drop of 3.6% and most European bourses nearly 2.0% down soon after midday.
Dollar against Yen
Verbal intervention from Japan’s Ministry of Finance has also helped the dollar against the yen.
According to EBS by 1340 GMT the dollar had gained back from Y86.29 to Y86.71, but was still lower from Y87.33 level late Wednesday in New York.
The dollar has also shown a rise and it is at CHF1.0028, after falling as far as CHF0.9916 and in New York it is being quoted late at CHF0.9960.
Euro
The euro dropped down from $1.5143 to $1.5068 and from Y132.25 to Y130.65 .
British Pound
The pound was also fell from $1.6722 to $1.6539, as investors are worried about the exposure that U.K. banks have to the Dubai World.
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