Pound Falls to Lowest in Almost Two Months on Dubai Concerns
Dec. 9 (Bloomberg) -- The pound fell to its lowest levelin almost two months against the dollar on concern Dubai’sstate-controlled companies will have to sell U.K. assets to payfor loan obligations.
The British currency weakened versus 15 of its 16 majorcounterparts after Moody’s Investors Service said yesterdaythat deteriorating public finances in the U.K. and the U.S. maytest their Aaa ratings. The yen reversed earlier gains onspeculation the Bank of Japan will take more credit-easingmeasures after a report showed the world’s second-largesteconomy grew less than earlier estimated in the third quarter.
“There are concerns that companies in Dubai, which arefalling behind on debt payments, may need to sell U.K.property,” said Yuji Saito, head of the foreign-exchange groupin Tokyo at Societe Generale SA. “Risk aversion is prevailing,so the dollar will probably be bought. The pound will likely besold.”
The pound declined to $1.6261 as of 12:22 p.m. in Tokyofrom $1.6287 in New York yesterday, after earlier falling to$1.6226, the lowest level since Oct. 15. The U.K. currencydropped to 143.70 yen from 144.03 yen, and fell to 90.61 penceper euro from 90.27 pence.
The yen traded at 130.20 per euro from 130.03 in New Yorkyesterday, after earlier climbing to 129.66, the strongestsince Dec. 1. Japan’s currency was at 88.36 per dollar from88.43. The euro fetched $1.4734 from $1.4704.
Dubai Companies
The U.K. currency fell for a fifth day against the dollar.Nakheel PJSC, the Dubai World-owned property developer seekingto renegotiate debt, had a first-half loss of 13.4 billiondirhams ($3.65 billion) as revenue fell and it wrote down thevalue of land and property, according to a document obtained byBloomberg News.
On Nov. 25, the government said it was seeking a“standstill” agreement on Dubai World’s debt. Moody’s slashedthe credit ratings for six Dubai government-related firms,saying “no meaningful” support should be assumed forcompanies if the government hasn’t guaranteed it.
Moody’s said yesterday the U.K. and the U.S. have“resilient” Aaa ratings, as opposed to the “resistant” topratings of Canada, Germany and France. Moody’s added that itstop debt ratings on the U.S. and the U.K. may “test the Aaaboundaries.”
The yen reversed an earlier advance on prospects the BOJwill expand its credit-easing measures to support the fragileeconomic recovery.
Japan’s Economy
Japan’s gross domestic product rose at an annual 1.3percent pace in the third quarter, slower than the 4.8 percentreported in preliminary figures last month, the Cabinet Officesaid today in Tokyo. The median estimate of economists surveyedwas for 2.8 percent growth.
“The economic rebound still isn’t that strong,” saidMasanobu Ishikawa, general manager of foreign exchange at TokyoForex & Ueda Harlow Ltd., Japan’s largest currency broker.“Given these worries, the central bank may take more policyaction. This would likely be negative for the yen.”
Japanese Prime Minister Yukio Hatoyama unveiled a 7.2trillion yen ($81 billion) stimulus package yesterday and theBank of Japan last week announced a 10 trillion yen creditprogram to revive the economy.
Gains in the euro may be curbed on speculation creditratings of more European nations will be cut after Greece’sdebt ranking was lowered by Fitch Ratings.
The European Commission is ready to help Greece get togrips with its budget deficit, the European Union’s Economicand Monetary Affairs Commissioner Joaquin Almunia said in astatement late yesterday. He didn’t say what form anyassistance may take.
Greece
“European Union and eurozone policy makers continue tofocus their attention on Greece following yesterday’s downgradeby Fitch,” said Gareth Berry, a currency strategist at UBS AGin Singapore. “For instance, EU’s Almunia has said a difficultsituation in one eurozone member state is a matter of commonconcern for the eurozone as a whole. We continue to target theeuro at $1.45 in one month.”
Fitch yesterday lowered Greece’s credit rating one step toBBB+, the third-lowest investment grade, and said the outlookfor the rating is negative. Standard & Poor’s on Dec. 7 putGreece’s A- rating on watch for a possible downgrade, andrevised the outlook on Portugal’s rating to negative fromstable.
To contact the reporters on this story:Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: December 8, 2009 22:52 ESTSource: Bloomberg
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