Kiwi suffered as risk aversion at the back end of last week, though stronger this morning

The kiwi dollar retreated to two and half month low against the pound on Friday as risk appetite took a sharp downturn as the Dubai debt issue deepened.

• The New Zealand dollar followed the broader market events and directions that unfolded at the end of last week with regards to the concerns arising over debt issues in Dubai.
  
• In response, sterling reached a high of 2.33 after a sharp pull back in risk activity saw investors trim their positions is the "riskier" currency.
  
• The kiwi is firmer this morning as investors are more confident and less risk averse after the UAE offered to help banks in Dubai, reducing fears of a debt default.

Sterling climbed higher against the aussie at the end of last week, but aussie buying as resumed this morning

The pound built on substantial gains from Thursday, hitting a three-week high against the high risk aussie dollar on Friday as investors pared back carry trades.

• Concerns over the Dubai defaulting on their debts led to a shift in risk sentiment at the end of last week, which dulled demand for the Australian currency.
  
• The sudden loss of risk in the market saw carry trades unwound as investor recouped their risky assets and bought back safe-haven currencies.
  
• The movement enabled the rally strongly against the higher-yielding aussie, posting a 3-week high of 1.8235, before capping its gains and closing the week at 1.8194.
  
• However, in trading this morning, the more common trend has resumed as fears that Dubai may not repay its multi-million dollar debt abated slightly, with the aussie rapidly recovering its losses as risk appetite returns to the table.
  
• The aussie is currently up over a cent against a broadly weaker British pound, which has come under pressure following a weak consumer confidence survey.

Volatility was high on Friday though the euro recovered to close the day near $1.50. It is climbing higher this morning

After a sharp sell-off, the euro recovered its poise to close the week just below $1.50, marginally down on the day against the US currency.

• Turbulence returned to currency markets towards the end of last week after questions were asked about the stability of emerging market debt.
  
• It should have been a relatively quiet Friday with the US effectively on holiday from Thursday onwards for Thanksgiving. But the lack of US trade only exacerbated volatility on foreign exchanges after Dubai asked creditors of its Dubai World holding company for a six-month standstill on debt repayments.
  
• In response, investors dumped risky assets in a knee-jerk reaction to the news, which saw the single currency drop near two cents in early trading.
  
• However, the euro was able to recoup most of its losses as European stocks recovered from their sharp losses on Thursday.
  
• Despite the Dubai shock, the dollar also remained subdued in the wake of the minutes from the Federal Reserve's latest meeting which appeared to give traders the green light to sell the US currency.
  
• In trading this morning, dollar selling has resumed after the United Arab Emirates offered emergency assistance to banks in Dubai, soothing market fears about a looming debt default.

Risk aversion remained high on Friday morning, though the pound did recover in the later sessions

Sterling initially plummeted to a three-week low against the US dollar on Friday, but recovered some 1.4% through the day to close only marginally down, just over $1.6500.

• Ongoing worries over Dubai's financial sector had the UK currency under pressure on Friday morning as concerns developed regarding the extent of the exposure of the UK banks to Dubai.
  
• In addition, trade continued to be volatile in a holiday-thinned market. US markets were on a shortened session after being closed the previous day for Thanksgiving Day holiday.
  
• However, the pound was able to recover some of its losses through the afternoon session as UK equities made a recovery, weakening demand for the haven currency.
  
• In trading this morning, the greenback is once again under pressure after Dubai soothed concerns about the looming debt default, which has encouraged investors to resume buying riskier currencies.
  
• Currently the pound is trading 0.2% up, despite a weak UK consumer confidence survey, with the price consolidating above 1.6500.

The pound made up significant ground to close Friday slightly higher than the euro

Having dropped to a one-month low of 1.0950 against the single currency on Friday morning, the pound steadily recovered to close the day marginally higher at 1.1010.

• Sterling continued to slide in early trading on concerns about the potential damage to the fragile UK banking sector from Dubai's surprise delay on debt repayments.
  
• On Wednesday, Dubai moved to restructure its biggest corporate debtor, Dubai World, and delay repayment on some of the company's $59 billion of liabilities.
  
• Major UK banks have made large investments in Dubai, which has exposed them to the financial problems facing the country. Additionally, Middle Eastern players have been big buyers of sterling in recent weeks.
  
• But the pound came off its lows as UK shares recovered, led by bank shares which were hammered on Thursday. London's FTSE 100 was up 0.8% on the day after falling sharply earlier in the session.
  
• In trading this morning the pound is approaching its one-month low against the euro after figures showed an unexpected fall in UK consumer confidence underlining ongoing weakness in Britain's economy.