IFX Market Report - 27 November 2009
Sterling fell yesterday, hitting its weakest in a month against the euro and a basket of currencies because of worries about British banks' potential exposure to debt problems in Dubai. Dubai's shock move on Wednesday to restructure Dubai World, and delay repayment on some of the company's $59 billion of liabilities, sent ripples through financial markets, denting equities and riskier currencies. Some traders and analysts said sterling was underperforming because of concerns that some UK banks may be affected, although no exposure was confirmed. The pound is particularly sensitive to any banking sector problems, given the fact that the financial sector makes a large contribution to the UK economy. In the UK the FTSE 100 fell 3.2 percent, its largest one-day decline for eight months.
At 4.00pm, the pound was down 0.4 percent against the euro at €1.1001, earlier the single currency broke above 91 pence (€1.0989) for the first time in a month. Sterling fell 1.3 percent against the dollar to $1.6495, just shy of a session low $1.6475. Against a broadly firmer Japanese yen, sterling fell more than 2 percent to hit a six-week low of 142.60 JPY.
European bank shares fell around 5 percent yesterday on concern about their potential exposure to Dubai debt problems. The fall was led by HSBC, Standard Chartered, Barclays, Deutsche Bank, Royal Bank of Scotland.
Apart from the Dubai crisis, because of Thanksgiving in the US, yesterday did not see much in the way of important data releases. Today we have the release of The Consumer Confidence data released by the European Commission, this is a leading index that measures the level of consumer confidence in economic activity, the data releases today are not expected to have a direct impact on market volatility.
At 10.00am this morning the pound was at $1.6392, €1.1004, 12.41 ZAR, 141.80 JPY, 11.51 SEK, 1.7565 CAD, 1.6598 CHF and AU$1.8193. The euro had fallen to €1.4895 against the US dollar.
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