TOKYO (MarketWatch) -- Dubai reported on Monday, December 14, 2009 that it received $10 billion in funds from fellow emirate Abu Dhabi. It is planning to use the funds to repay part of the debt owed to multinational corporation Dubai World and its property unit Nakheel.
$4.1 billion of the total amount will repay Nakheel's Islamic bond that matures today, and the rest will be used to fund Dubai World's obligations throughout the end of April 2010.
"We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," said Dubai Supreme Fiscal Committee Chairman Sheikh Ahmed bin Saaed al-Maktoum in a statement.
As a result, said Reuters, "Asian stocks rebounded...which pushed down the yen but boosted the euro and emerging Asian currencies as risk appetite improved."
The dollar rose up to 88.90 yen after the news, from about 88.50 yen. The euro also leaped to 130.43 yen from about 129.40 yen.
Budding Asian currencies, such as the South Korean won and Indian rupee, firmed against the dollar, taking their prompt from the even firmer euro.
In East Asia, the news "helped stocks rebound, and has taken some of the safe-haven bid out of Asian debt markets," added analysts at Action Economics.
The statement also stated that the United Arab Emirates Central Bank, which governs financial policy in Dubai, Abu Dhabi and other UAE constituents, "is also prepared to provide support to local UAE banks."
The government of Dubai will reveal a "comprehensive reorganization law," based on "internationally accepted standards for transparency and creditor protection," continued the statement.
The news started a rally in Gulf stock markets. The Dubai Financial Market's main index opened up 10 percent at 1866.82 - major player Emaar Properties rose 15 percent -- and Abu Dhabi's main index opened 6.1 percent higher at 2772.34, said market quotes reported by Zawya Dow Jones.
Stock markets in Hong Kong, Shanghai and Sydney began trade higher following the Dubai news.
Financial markets around the globe have been jittery about Dubai debt exposure since late last month, when the emirate's Dubai World holding company sought to restructure $26 billion of debt. About $6 billion of that was related to the Islamic bond -- or sukuk -- of its Nakheel unit.