Dubai Bailout Boosts Euro

TOKYO -- The euro rose against the dollar on Monday after Dubai said it received billions of dollars in emergency funds to bail out its troubled state-owned conglomerate, easing concerns that the debt crisis there might worsen and roil the global economy.

Dubai said in late Asian trading hours it had received $10 billion in financing from neighboring oil-rich emirate Abu Dhabi to pay part of the debt of Dubai World and its struggling property unit, NaThe news eased worries that Dubai could rock global financial markets and the economy by defaulting on its debt, dealers said. Traders responded by buying the euro and other c

"The news gave some relief to the foreign exchange markets," said Koji Fukaya, a senior currency strategist at Deutsche Securities. Mr. Fukaya added that the euro is unlikely to rise above $1.4750 at least this week because the overall effects of the Dubai development on the global economy or major currencies are limited.

Optimism over the global economy was also encouraged by news that Citigroup Inc. is about to repay its credit-crunch bailout from the U.S. government.

The main beneficiary of the improved mood was the euro, but investors appeared wary of pushing the single currency too far while they wait for Greece to unveil its plans for reducing its budget deficit. Without a convincing timetable, international support for Greek bonds will continue to fall and the country runs the risk of defaulting on its sovereign debt

Investors are waiting for Greek Prime Minister George Papandreou to unveil details of plans to reduce the country's budget deficit over the next four years to 3% of gross domestic product from about 12.7% now.

Satoshi Okagawa, chief foreign-exchange forward trader at Sumitomo Mitsui Banking Corp., noted that Greece's unsolved debt problems remain "a major bottleneck" for euro investors. Uncertainty over whether the country, like the Dubai government, could get outside help to avoid defaulting on its debt make it hard to buy the euro above $1.4800 now, Mr. Okagawa said.

By 1035 GMT, the dollar had fallen to 88.53 yen from 89.22 yen late Friday in New York, according to EBS. The euro was up at $1.4648 from $1.4621 but down at 129.68 yen from 130.43 yen.

The pound fell to $1.6229 from $1.6239. Sterling largely shrugged off the latest housing report from Rightmove showing that prices fell 2.2% this month.

The news on Dubai emerged too late to help Asian stock markets recover all of their earlier losses and the Nikkei ended down 0.2% on the day.

Some analysts reckon that the Abu Dhabi move will be instrumental in helping risk appetite to recover.

"Markets are likely to reverse the risky asset decline seen Nov. 25 when Dubai announced that it would not stand by its debt obligations," said currency strategists at BNP Paribas SA.

European stocks started the day higher with gains of about 1%, with investors also buoyed by a report of Citigroup's repayment plans. This will be the last of the major U.S. banks to exit the U.S. government's bailout program.