Dubai debt causes sterling to slide

The pound dropped to its lowest level against the euro in a month on Thursday (November 26th) as markets reacted to fears over debt problems in Dubai.

Dubai World, the state-owned conglomerate, has delayed repayment on some of its $59 billion (£36 billion) liabilities, which represent a large proportion of the emirate’s total debt.

Ian Stannard, currency strategist at BNP Paribas, told Reuters: ’There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure.’

Meanwhile, Francis Lun of Fulbright Securities said that ’the panic button’s been hit again’, with many analysts fearing that the problems in Dubai could mark a return to the turmoil of the financial crisis.

European bank shares fell by more than three per cent on Thursday due to uncertainty about the extent of their exposure to economic instability in Dubai.

Reuters noted that sterling also remains under pressure as a result of concerns regarding the amount of stimulus cash injected into the economy under the Bank of England’s programme of quantitative easing.
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