Dollar Down to January Levels on Credit Rating Concerns

The dollar fell to the lowest level against the euro since early January as the S&P credit rating agency revised U.K. rating outlook and traders are afraid that the U.S. will be next.

The euro rose against both the U.S. dollar and the British pound today as the possible credit rating downgrade is one of the worst events for the debt-relying economies and currencies of both the United States and the United Kingdom. The Japanese yen also rose against the dollar and the pound, additionally spurred by the commentary by Japan? s Finance Minister Kaoru Yosano that the government won’t use the currency intervention to keep the yen down.

Standard & Poor’s changed the U. K. AAA credit rating outlook from «stable» to «negative» yesterday. Although some analysts believe that it will take some time and probably a real downgrade of the U.K. rating itself before the U.S. rating outlook will be changed to «negative», the dollar bulls are close enough to a panic. A downgrade of a rating means less attractive government bonds, which means less attractive currency and a high probability that the central bank will have to print the needed money.

EUR/USD rose from 1.3900 to 1.3930 as of 8:52 GMT today after reaching as high as 1.3977 earlier — the highest level since January 2. GBP/USD fell from 1.5850 to 1.5763. EUR/GBP went up from 0.8768 to 0.8830, while USD/JPY fell from 94.34 to 94.15.

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