Crisis Over: UAE Bailout Gives Traders Green Light To Keep Taking Risks

As a potential financial crisis, traders have already forgotten about Dubai.

The key factor is that the UAE is backstopping banks, which, as we know from experience here, is the signal to go back to business as usual.

Bloomberg: The euro and the Australian dollar rose against the greenback and the yen after the United Arab Emirates’ central bank said it “stands behind” the country’s banks, easing concerns about a possible default by Dubai World.

The U.S. dollar pared earlier gains against Japan’s currency after the Mainichi newspaper reported Finance Minister Hirohisa Fujii as saying the government won’t intervene to weaken the yen. The euro gained for the first time in three days after the Abu Dhabi-based central bank of the U.A.E. said lenders will be able to borrow using a special facility tied to their current accounts.

“The market is willing to assume that there will be no actual default in Dubai,” said Sean Callow, a strategist at Westpac Banking Corp. in Sydney. “We’re likely to get back to what everybody is most comfortable with, which is selling U.S. dollars.”

After swooning on Friday, the futures are already in the green for tomorrow.