November 27, 2009
And a happy Thanksgiving it was for the greenback! With most traders out enjoying their turkey dinners, liquidity thinned out and gave way to a strong one-way move yesterday. The greenback stayed on top of its game against most major currencies, except for the Yen - its safe-haven rival.
Even though the US economic calendar was on holiday mode, the greenback was able to benefit from risk sentiment. In fact, the greenback decided it was time to go out of its comfort zone and take cue from other economic reports apart from those from the major economies. And its country of choice? Dubai!
News of Dubai's credit problems, slated to be the largest sovereign default in almost a decade, hit the airwaves and caused quite a ruckus in the markets. Word on the grapevine is that Dubai begged for a "standstill" or an extension of their debt from international financial institutions. Credit-rating agencies, such as Standard and Poor's and Moody's, were not to pleased with this. As a result, they lowered their ratings for state-run companies in case Dubai announces an official default.
Now, you may be wondering... How the heck does this concern the US?! Well, this event seemed to have triggered a wave of risk aversion in the markets. I mean, we're talking about the worst sovereign debt default here! It just might give Argentina's sovereign debt a run for its money - metaphorically speaking, of course.
Anyway, the US economic calendar is empty again this Black Friday as most traders are still enjoying the holidays. But for those itching to catch some pips off the forex market's non-stop action, be mindful that thin liquidity is likely to cause high volatility!
"The only cable I watch is the pound baby."