Dollar slips in London

The dollar slipped on Monday after Dubai's announcement it had received help from Abu Dhabi to repay its debts bolstered risk appetite and eroded some of the US currency's safe-haven appeal. The currency market's bent to sell dollars on improved risk appetite - global equities bounced on the $10 billion bailout - contrasted with last week when strong US economic data boosted risk sentiment to the benefit of stocks and the dollar.
The dollar index retreated on Monday from its highest in more than a month hit last week, after Abu Dhabi agreed to bail out its debt-laden neighbour with $10 billion in aid, easing worries about a possible debt default by Dubai. The bailout announcement also triggered selling in the low-yielding yen.
But the initial dollar and yen weakness fizzled out as the European session progressed, particularly in the yen as traders cited talk of Japanese repatriation. The euro's gains were also capped as Dubai's debt issues underlined fiscal concerns in other countries, including Greece, whose credit rating was cut last week.
"There's been an improvement in the performance of risky assets and risky currencies today ... and the mood is more upbeat," said Standard Chartered FX strategist Rob Minikin. At 1235 GMT the dollar index, a measure of the greenback against six major currencies, was down 0.2 percent at 76.417, capped by resistance at the 100-day moving average of 76.691. Last week it hit a near six-week high of 76.726.
The euro was up 0.2 percent at $1.4650, having climbed to around $1.4685 after Dubai said it had received funding from Abu Dhabi to help repay $4.1 billion in an Islamic bond maturing on Monday. The dollar fell 0.6 percent to 88.50 yen, unable to sustain a jump to around 89 yen after Dubai's announcement. Traders cited Japanese exporters selling the greenback after its rise.
The retreat in dollar/yen helped to prompt a broad buy-back in the yen, which recovered from initial selling against higher-risk currencies, including sterling and the Australian and New Zealand dollars. "The market's reaction to the Dubai news was relatively positive, but there remain question marks relating to the broad issue of sovereign risk, which will be one of the themes going into 2010." said Ned Rumpeltin, currency strategist at Nomura. Traders were also looking ahead to a two-day Federal Reserve policy meeting, which begins on Tuesday.