Posted December 13, 2009
The Dubai debt issue remains unresolved with the loan payment due on Monday this week. The UK pound fell against the US dollar as the economy recovers slower than expected. The Canadian dollar weakened as gold and oil prices fell. The US dollar rose against the euro.
In case you’re wondering where the Dubai debt problem stands, Monday should provide more answers. That’s because Monday is the day the $3.52 billion bond payment is due and the last word was Dubai is unable to meet its obligations. State owned developer Nakheel, developer of Dubai World, has been working on restructuring the debt. Unfortunately analysts are describing the process as having a lack of clarity which is worrying investors.
Greece is another country experiencing urgent credit problems. The country’s debt rating was recently downgraded, but the government has assured the financial world it is taking steps to reduce its deficit. Greece has no plans to ask the International Monetary Fund for help and plans on cutting its debt by 3.6 percent in 2010. Whether this is possible remains to seen, but Finance Minister George Papaconstantinou believes the financial markets are too pessimistic about Greece’s situation.
Last week the UK pound posted a weekly loss against the US dollar for the fourth consecutive week. The pound weakened to $1.6244 last Friday and was at $1.6260 by late Sunday night. The pound was at 89.96 pence per euro at the close of business Friday New York time and at 89.93 pence per euro by Sunday evening.
The UK is recovering very slowly from the recession and the central bank chose to continue its asset purchase stimulus program. Thought Moody’s says the outlook is stable the UK debt is expected to continue to grow and that is impacting the pound. Estimates put current year GDP contraction at 4.75 percent on an annual basis.
The Canadian dollar weakened overall last week. On Friday the loonie was at $1.0608. As of Sunday night it had changed slightly to $1.0601. This means one Canadian dollar buys 94.29 US cents.
The Canadian dollar is responding to large declines in gold and oil prices. Oil fell below $70 a barrel to $69.65 for January delivery. Gold is down to $1,115.30 per ounce. Both of these commodities make up a large percentage of Canada’s exports. In addition, an improving U.S. economy has led to a stronger US dollar recently.
In the US the number indicates stronger retail sales. Retail sales had been predicted to rise by .6 percent for November and instead they came in at 1.3 percent. In addition, the consumer confidence index rose to 73.4 for December which is greater than predicted also.
The US dollar advanced to $1.4615 against the euro. By Sunday evening the yen had fallen to 88.51 yen against the US dollar. The Dollar Index rose to 76.565 for the week as of Friday.
The New Zealand dollar rose to 72.47 US cents. The central bank of New Zealand has already indicated it will raise its benchmark interest rates sooner than originally estimated. The New Zealand housing market is doing well leading economists to believe the recovery pace will accelerate.
Following Greece and Spain downgradings, the debt outlook for Portugal was cut by Standard and Poor’s. Portugal was downgraded to negative from stable.
The Mexican peso weakened against the US dollar to 12.8843 pesos per dollar.