Euro Suffers as Dubai Situation Worsens

The single European currency approached the yesterday’s minimums against the U.S. dollar and the other major currencies today as the bad news on the Dubai’s troubled debt worsened the global financial outlooks.
The demand for the high-yielding assets, including the riskier currencies (such as the euro), decreased after the Financial Times reported that the creditors of one of the Dubai World’s branches are adding pressure on the debtor. The report of the decreased industrial production in France in October has also spurred euro’s decline.
Month-over-month the industrial production declined by 0.8 percent in France, while a growth by 1.6 percent was expected by the market participants. Any disappointment in the fast economic recovery is going to hurt the euro. The currency also decreased to the lowest level against the Australian dollar since November 18, as the employment increased 6 times faster than expected in Australia.
But despite the other fundamental factors, the currency analysts mention Dubai situation as one of the main reasons for the current euro’s drop, which runs since December 4. Carry trades are at risk and they are mostly based on selling the dollar and the yen and buying the euro.
EUR/USD went down from 1.4738 to 1.4711 after reaching as low as 1.4685 today. EUR/JPY gained slightly — from 129.68 to 129.73, while EUR/AUD decreased from 1.6194 to 1.6078 or 0.7 percent.

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