Asian markets have rallied because of efforts in the United Arab Emirates to shore up banks hit by Dubai's debt problems. But the region is keeping a close eye on Dubai's debt and a weakening dollar.
Asia reacted positively Monday to word from the United Arab Emirates' central bank that it would inject money into the banking system. Dubai's neighboring emirate, Abu Dhabi, promised support for certain Dubai companies, alleviating concerns over Dubai debt that dragged world markets down on Friday.
In South Korea, shares on the Kospi index rose nearly 2.7 percent, while Hong Kong's Hang Seng rose more than three percent, and Tokyo's Nikkei was up almost three percent. Gold and oil also traded at higher prices.
Kwon Hyouk-se, vice chairman of South Korea's Financial Services Commission, on Monday offered investors a message of reassurance.
He says South Korea's exposure to Dubai debts is not big, and that local financial markets and the economy in general are in good shape to cushion its impact.
He adds that Seoul will strengthen a daily market monitoring system to prevent possible instability resulting from the Dubai shock.
Last week, Dubai World, the state-owned holding company responsible for much of the city-state's massive development portfolio, said it needed more time to pay off nearly $60 billion in debt. That spooked investors around the world, sending markets sharply lower.
Financial analysts say markets reacted swiftly because of the global context of the announcement.
Sung Taeyoon is an economics professor at Seoul's Yonsei University.
He says Dubai is not big enough by itself to damage other countries, but its debt crisis can keep moving to other countries, such as Ukraine and other areas of eastern Europe which are heavily dependent on international financing.
Market experts like Sung say memories of last year's U.S. financial crisis are still very fresh. They worry that Dubai's debt problems may cause banks to clamp down on lending that is necessary for economic growth.
The U.S. dollar strengthened slightly against the yen Monday, easing worries about Japanese exports. The dollar has steadily weakened against the yen recently, making Japanese goods more expensive overseas.
Japanese Chief Cabinet Secretary Hirofumi Hirano expressed concern Monday about the currency market's effects on the country's troubled economy.
He says the yen is rising, while stocks are falling. Japan is trying economic strategies to create jobs, but Hirano wonders aloud whether it will be enough.
The government on Monday announced plans new stimulus spending of about $31 billion before next March.