Pound, Euro Fall on Newspaper Report That U.K. Rating at Risk

It makes more and more sense to be diversified in your cash/bond holdings.  Only a matter of time before this takes place in the USD.

April 24 (Bloomberg) — The pound and the euro fell against the dollar after the Daily Telegraph said Moody’s Investors Service and Standard & Poor’s are reviewing the U.K.’s AAA credit rating on concern about the nation’s rising debt burden.

The dollar headed for a third weekly loss against the yen before a government report that economists say will show orders for U.S. durable goods fell for the fifth time in six months. The yen is poised for its third week of gains versus the euro on speculation the global financial crisis is not over, prompting investors to reduce holdings of higher-yielding assets.

“Fiscal conditions in the U.K. are deteriorating while interest rates are falling, weakening the allure of the pound,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. The newspaper report “further reduced the attractiveness of the currency,” he said.

The U.K. may lose its top-ranking sovereign credit rating after the government said national debt will reach 1.4 trillion pounds ($2.1 trillion) over the next five years, the Daily Telegraph reported. The pound lost 1.2 percent on April 22 when Chancellor of the Exchequer Alistair Darling announced the biggest budget deficit on record.

Moody’s analyst Arnaud Mares said Treasury projections for public-sector net borrowing are “a cause for concern,” while a Standard & Poor spokesman said it was looking at details of the budget and had no comment at this time, the newspaper said.

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categories Commodities/Futures, Currency, Fixed Income/Bonds | | datetime April 23, 2009 8:37 pm

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