RBA Rate rise pressure!!

Dubai's decision to delay its debt payments dominated the last week. We saw more good economic data released globally but Dubai news led to a big increase in investor risk aversion and sharp falls in most share markets, falls in currencies like the Australian dollar, Euro and a fall in the value of emerging market debts.

In Australia, both construction and capital expenditure data clouded expectations the Reserve bank of Australia would raise interest rates when they meet on Tuesday next week. If they raise rates again on December 1, it will mark the first time the bank has raised rates three times in a row since January 1990. A high interest rate means a higher return on Australian investments and the local unit tends to lift higher on speculation of a rate rise.

Construction figures released by the Australian Bureau of Statistics (ABS) showed total construction work done in Australia rose by a seasonally adjusted 2.2 per cent in the September quarter. However, capex data later in the week showed new private capital expenditure fell by a seasonally adjusted 3.9 per cent in real terms in the September quarter, well below market expectations of a one per cent rise. The worse than expected capex data made for a slightly less hawkish outlook for a rate rise next week, according to analysts.

http://www.moneytrading.com.au/

Dubai Debt restructuring is a "storm in a teacup,” - According to CBA

The issue is over restructuring a relatively small amount of debt at $60 billion, which according to an August Statement by Dubai World, is backed by $99 billion in assets,” wrote Richard Grace, chief currency strategist with CBA. The United Arab Emirates, which is forecast to return to its long-term average current account surplus of 13.7 percent of gross domestic product, probably won’t let the investment company default, Grace wrote.

Possible International Debt Crisis

New international debt crisis erupted in Dubai shook the market. The US dollar is 14-year lows against the yen deepened on Friday and the Australian dollar fell 3 percent against the Japanese currency as investors closed risky trades funded by yen. Australian stocks tumbled 2.7 percent on Friday as miners and banking stocks slumped following metal prices and European stocks tumbling overnight.

@ http://www.moneytrading.com.au/

Dubai World on the verge of Technical Default as it Seeks to Delay Debt Payments

Dubai World, with $59 billion of liabilities, is seeking to delay debt payments of $3.52 billion of Islamic bonds due on December 14 from its property unit Nakheel . Moody’s Investors Service and Standard & Poor’s cut the ratings on several state companies, saying they may consider a default. Deloitte will be working with state-controlled companies on restructuring the debts. Dubai may have to again rely on Abu Dhabi, the capital of the U.A.E. and holder of the world’s sixth-largest crude oil reserves, for a bailout similar to one in February for a $10 billion.

Aussie & Kiwi plunged against majors!

Following worse than expected Australian Capital Expenditure data today, Australian Dollar continued to decline in European Market. Today's data has in fact reduced the probability of interest rate hike on 1st December. RBA has already increased the interest rates on last two consecutive meetings and today's debt futures market was suggesting still 70 per cent chance the RBA will increase the interest rate by 0.25 per cent on 1st December.