Dollar gains on Dubai debt concerns
Greenback rallies against rival currencies and weighs on gold after state-owned company requests to delay debt repayments.
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NEW YORK (CNNMoney.com) -- The dollar gained ground against major rivals Friday as investors cut exposure to risky assets and high-yield currencies after Dubai's state-owned finance arm sought to suspend debt repayments.
The greenback edged higher against the euro to $1.4962 and against the pound to $1.6480. It also rose against the yen to ¥86.7550.
"Investors have been taking risk off the table, and the dollar has gained," said Neil Mellor, currency strategist at Bank of New York Mellon in London. "It's a play out of the established relationship: The dollar falls when risk appetite rises, and vice versa."
On Thursday, Dubai World requested an extension on $60 billion in debt payments, sparking credit concerns across financial markets. The debt was used to fuel a construction projects, but the Middle East country got hit by a real estate crunch.
Dubai's move weighed on Wall Street, and sending U.S. stocks lower Friday as investors flocked to the dollar.
"The Dubai situation could deteriorate but there are rumors that Abu Dhabi will stump up more cash, which could calm things. But we'll have to see," said Mellor.
The overall outlook for the dollar remains bearish. The Federal Reserve's decision to keep interest rates near zero, has pressured the greenback, and market watchers believe that will continue to be the driving force weighing on the dollar in the foreseeable future.
"The Fed has made it patently clear in the last couple of weeks that it has no intention of shifting its monetary policy even marginally any time soon," Mellor said. "It's not prepared to do that because deflation is the number one issue. Inflation will have to be dealt with at a later date. So it's hard to see any recovery in the dollar on a solid basis."
Gold. Investors seeking safety in the dollar also knocked gold from its record run because a stronger dollar makes the precious metal more expensive for holders of higher-yielding currencies.
Gold futures for December delivery fell $12.80, or 1.08%, to $1,174.20 an ounce, off a all-time high closing price of $1,187.00 Wednesday.
A weak dollar has sent gold surging more than 10% this month. Demand for gold, which tends to store value better than equity-based investments, often rises in times of economic uncertainty. 
