Dubai Debt Restructuring: Is It Enough?

Dubai International Capital (DIC), the private equity unit of Dubai Holding, yesterday announced that they are looking to extend the maturities on some of their upcoming debt payments which came as a no surprise and it is unlikely to be the last time an UAE company will have to approach its lenders to ask for some latitude. Although Dubai World (DW) had come to a final agreement with its key creditors over the terms of its debt restructuring process, the company will still face considerable difficulty in meeting its future obligations.

DIC is seeking a 'three-month extension to 30 September 2010 of certain maturities' according to a company statement. The extension presumably applies to DIC's US$1.25bn loan maturing in June, although the company does have around US$2.6bn in debt overall which could also be affected. Although details are vague as yet, we would not be surprised if the company used the prospective three-month delay in order to negotiate a longer-term debt restructuring deal, similar to the one just hammered out by DW and its creditors.

Looking at the wider picture, Dubai's fundamental macroeconomic problems largely stem from the collapse in the domestic real estate market. Given that we expect demand for property in the emirate to remain subdued well into the medium term due to over supply of the properties, we consequently believe that over the coming years, many companies operating in the real estate sector are likely to struggle to generate sufficient operating cash flow (via sales) to pay back their borrowings on time. This analysis not only applies to real estate firms per se, but also to firms that are dependent on the Dubai real estate sector for their business. As such, investors are likely to remain extremely wary of any UAE company heavily exposed to the sector. Moreover, further requests for debt restructuring from other Emirati firms with either direct or indirect property market exposure are highly likely.

Traders continue to express anxiety over the developments in Europe

U.S. stock futures point to a lower opening Monday morning as traders continue to express anxiety over the developments in Europe and the likely impact of the same on global economic recovery notwithstanding positive signs of economic growth at home. With the first quarter reporting season winding down, economic data related to existing home sales will be of interest in addition to the developments in global markets, including commodity prices and currency movements. The euro, which rebounded in the previous couple of sessions, has once again failed to hold onto gains and is presently trading weaker against the dollar.

Australian Dollar Rises After Jobless Rate Holds at 5.3%

Australia’s dollar rose as a government report showed full-time jobs rose a seventh month in March, adding to the case for policy makers to extend the steepest interest-rate increases since 2000.

The gain in Aussie dollar was short lived as concern Greece may default on its debt damped investors’ appetite for riskier assets. The Reserve Bank of Australia raised benchmark borrowing costs on April 6 for the fifth time in six meetings and swaps traders are betting that 1 percentage point of further increases is likely over 12 months, according to a Credit Suisse AG index.

Australian Dollar Advances to 18-Month High on Policy Outlook

The Australian dollar advanced to the highest level in more than 18 months versus the yen as the Bank of Japan kept interest rates near zero today, maintaining the yield advantage of the South Pacific nation over Japan.

The so-called Aussie also traded near a two-month high against the greenback and a record against the euro after a rate increase yesterday by the Reserve Bank of Australia added to the appeal of the nation’s assets. Gains in the Aussie against New Zealand’s dollar were limited after Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said milk powder prices reached a 21-month high.

AUD up on RBA rate rise to 4.25%

THE Australian dollar gained in Asia trade today as the Reserve Bank of Australia's decision to raise interest rates for the fifth time in six meetings instilled confidence in the outlook for the Australian economy. Bond prices edged lower on the RBA decision, with short-dated bonds particularly weak.

In the first session following an extended Easter holiday weekend, traders were met with choppy action throughout the day. The Australian dollar looked to extend recent gains early in the day after being helped over the weekend by a better-than-expected US non-farm payrolls report that lifted more growth sensitive currencies around the world.

However, reports that Greece wanted to amend a recently signed agreement with the EU weighed heavily late in the morning. The local currency was also hurt during the morning by a growing feeling the RBA wouldn't hike its key cash rate in the afternoon, according to traders. That feeling proved to be incorrect, however, with the RBA raising its key cash rate 25 basis points to 4.25 per cent, leading to a rally in the Australian dollar against all major currencies.

Aussie consolidates above 0.9200 against US Dollar

The Australian dollar showed mixed trading against its major rivals on Monday morning in Asia. Aussie rose to 87.18 against the yen at the start of Asian trading, the highest peak in more than 18 months, shed some of its gains later during the session. The aussie-yen pair moved sideways thereafter and is currently worth near last week's closing quote of 87.0.

The aussie that jumped to a 5-day high of 1.4654 against the euro & reversed its course thereafter. The euro-aussie pair is presently trading at 1.4694, above last week's closing quote of 1.4686.

The Australian dollar advanced to a 17-day high of 0.9221 against the US dollar and a 12-day high of 1.3058 against the NZ dollar from last week's closing values of 0.9195 and 1.3030, respectively. The aussie is currently quoted at 1.3056 against the kiwi and 0.9206 versus the greenback.

Technical - AUD/USD struggling with resistance at 0.9180/85

Australian Dollar's rally from 0.9000 low last Friday, failed at 0.9210/15 aream , and the pair retreated yesterday to 0.9130. The Aussie has attempted recovery since although remains capped at 0.9180/85 area, while upside pressure eases.

In case of breaching 0.9180/85 (session high), next resistance levels lie at 0.9215 (Mar 30 high) and then 0.9250 (Mar 17 high).  On the downside, support levels lie at 0.9130 (Mar 31 low), and below here, 0.9065 (Mar 24 low) and 0.9000 (Mar 25 low).