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Currency Exchange – Forex Mamma

Dubai Debt Crisis Causes Turmoil on the Foreign Exchange

December 1, 2009 – Last week, Dubai World threw global markets into a frenzy when it announced that it was having trouble making payments on borrowed money to the tune of $60 billion. In the days following the announcement, the Forex and global stock markets have been volatile, to say the least. Dubai World bondholders, as well as investors as a whole, have been affected.

The debt in question is one taken out by Dubai World and developer Nakheel for various projects including massive skyscrapers, hotels and man-made islands. The debt payments, which Dubai World requested a delay on, were originally set to be due on December 14.

When Dubai World first made their announcement many investors took all of their money out of Dubai, instead choosing the security of the Japanese Yen and the US Dollar. However, nothing is permanent. The United Arab Emirates central bank, as well as Dubai’s neighbor Abu Dhabi, has pledged to provide Dubai’s banks with emergency support. Therefore, investors are now less pressed to take their money out of Dubai as the crisis seems to be easing and the US Dollar has fallen for the fifth month in a row.

The crisis in Dubai, which coincided with the US Thanksgiving holiday effected currencies around the globe. In addition to the USD the EUR, GBP, AUD and NZD were all affected. Oil prices also fell as a result of the debt crisis in Dubai. The market seems to be returning back to normal, as the Dubai crisis appears to be clearing up.