According to a recent talk in Dubai, work and sleep go hand-in-handMarch 31, 2015 10:46
UAE dirham forwards touch 5-mth high, seen retreating
State-owned Dubai World’s capital structure was inappropriate and needed urgent restructuring.
August 27, 2010 8:41 by Reuters
United Arab Emirates one-year currency forwards climbed to a nearly five-month high on Thursday, Reuters data showed, with traders citing tighter liquidity conditions they said should be temporary.
One-year dirham forwards jumped to around 105 points in February due to uncertainties around restructuring of some of Dubai’s debt-laden flagship companies. On Thursday they rose as high as 55 points, their highest since March and up from 28 points at Wednesday’s close.
A document obtained by Reuters on Wednesday showed that state-owned Dubai World’s capital structure was inappropriate and needed urgent restructuring, though dealers did not make a direct link.
“It (the move) seems a bit overdone, the move higher, and we should see a little bit of correction,” said Lyndon Loos, head of forex trading for Middle East and North Africa at Standard Chartered in Dubai.
“It is just one or two banks. It could be that one or two small deals they have with some of their clients prompted them to come to the market but fundamentally or economically there has been no justification for us to be at these levels,” he said.
Forwards later retreated a touch and were quoted at 45/55 points at 1215 GMT, according to Reuters data.
Traders use forward markets to bet on the future direction of currencies. The UAE dirham forwards now imply bets on a 0.12 percent weakening in the dirham over a one-year period. The dirham is pegged to the dollar at 3.6725.
Loos also said that the fact that offshore banks, unlike local ones, cannot go to the UAE central bank to borrow funds against certificates of deposits placed with the central bank could have added to the earlier spike.
Traders also said that tighter liquidity during the fasting month of Ramadan, when many UAE banks work shorter hours, added to the move.
“Nothing substantial is happening. The market is a little bit tight over here,” another Dubai-based trader said. “We do not see this sustaining for very long.”
(Reporting by Martin Dokoupil; editing by Patrick Graham)