On Thursday, Fitch downgraded the creditworthiness of UK banks Lloyds and RBS, and also Switzerland’s UBS. As the banks start to fail in the European Union and the credit rating downgrades negatively impacts the ability to turn around their collective economies, the Euro is starting to spiral downward.
David DeGerolamo
S&P downgrades Spain by one notch on weak growth outlook
Ratings agency Standard and Poor’s downgraded the long-term credit rating of Spain by one notch on Friday, knocking the euro down by a third of US cent as it followed hard on the heels of a similar downgrade by Fitch last week.
S&P cited Spain’s high unemployment, tightening credit and high level of private-sector debt among the reasons for the downgrade of the nation’s creditworthiness to AA- from AA.
S&P and Fitch now rate Spain as AA- and both also have signaled further possible downgrades
The Australian and New Zealand dollars weakened against their U.S. counterpart after Standard & Poor’s cut Spain’s long-term sovereign credit rating, damping demand for higher-yielding currencies.
The so-called Aussie and kiwi slid against the yen for a second day as declining Asian stocks spurred a flight to safer assets. Losses in the South Pacific currencies were limited before Group of 20 finance ministers meet in Paris today and policy makers discuss plans to tackle the impact of Europe’s debt crisis on global growth.
“I don’t think the market’s out of the woods yet,” said Thomas Averill, a director at foreign-exchange and interest-rate risk management company Rochford Capital in Sydney. “The Aussie is going to be drifting over the course of today and may get sold quite aggressively overnight.”
The Australian dollar slid 0.1 percent to $1.0180 at 2:56 p.m. in Sydney and fell 0.1 percent to 78.30 yen. New Zealand’s currency declined 0.2 percent to 79.38 U.S. cents and lost 0.2 percent to 61.06 yen.
The MSCI Asia Pacific Index dropped 0.9 percent.
Spain’s credit rating was cut for the third time in three years by S&P, who lowered the ranking one level to AA- with a negative outlook.
