DUBAI DEBT CRISIS PUTS BANKERS, STOCKS IN A TAIL SPIN
28 November 2009
New York stocks, U.S. dollar tumble on Dubai fallout fear
NEW YORK
New York stocks plunged Friday, with the Dow Jones index briefly shedding more than 230 points as investors dumped shares amid growing concern about debt problems in Dubai, while the U.S. dollar fell at one point to a 14-year low against the yen in New York trading.
The Dow Jones Industrial Average, which gained 30.69 points Wednesday, dropped 154.48 points to close at 10,309.92. The tech-heavy Nasdaq Composite Index, which was up 6.87 points the previous trading day, lost 37.61 points to 2,138.44.
Dubai said on Wednesday it was asking for a six-month reprieve on paying Dubai World's debts as a first step to restructuring the company.
Dubai World said it would ask creditors to agree to a standstill on US$60 billion of debt until at least May.
Market observers noted if Dubai should prove unable to pay the debts, many of the world's leading banks will suffer losses.
Sell orders swelled on a fear that a default by a government investment firm in Dubai could have a ripple effect on world financial markets. But stocks recouped some of their losses later in the day on the view that the impact on U.S. financial institutions would be limited.
As the Dubai effect spread from Europe to the Asian and U.S. stock markets, foreign exchange market participants opted to sell the dollar for the yen to avert risk, briefly sending the U.S. currency down to 86.35 yen, its lowest level since July 1995 in New York.
After recovering to 87.02 yen apparently due to caution about possible intervention by Japanese monetary authorities to curb the sharp rise of the yen, the dollar stood at 86.47-57 yen at 5 p.m., compared with 86.15-16 yen in Tokyo at 5 p.m. Friday.
The euro traded at $1.4982-4992 and 129.45-55 yen at 5 p.m. versus $1.4861-4863 and 128.03-07 yen in late Tokyo trading. The yen also gained ground against the euro in New York, briefly hitting a four-month high of 128.94 yen.
The New York stock market was closed Thursday for the Thanksgiving holiday. The trading floor closed earlier than usual on Friday. (PNA/Kyodo/Xinhua) Socialize this
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