The U.S. dollar traded in a relatively flat range against most of its counterparts overnight, but the U.S. dollar index is set for a weekly decline amid concern the U.S.’s AAA credit rating is at risk. Standard and Poors may lower the U.S.’s long-term rating by one or more notches into the AA category if it concludes Congress and President Obama’s administration haven’t achieved a credible solution to the rising government debt burden and aren’t likely to achieve one in the near future, the company said in a statement yesterday. S&P said there is a 50 percent change the U.S. will lose its top credit rating even if Congress reaches agreement on raising the debt ceiling to stave of default. Moody’s put the U.S. Aaa rating on review for a downgrade earlier this week. However, the Australian dollar fell after Westpac Banking Corp. became the first among the nation’s four biggest lenders to predict the central bank will cut interest rates in December. The South African rand continued to fall as strikes in South Africa created fuel shortages. Meanwhile, the economic docket showed the cost of living in the U.S. fell in June for the first time in a year as the biggest drop in energy costs since 2008 masked growing inflation in other goods and services like autos and textiles. The consumer-price index decreased 0.2%, compare with the 0.1% drop median forecast of economists surveyed. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.3% for a second month.
The Euro was mostly unchanged against the U.S. dollar overnight, before the European Banking Authority releases the results of stress tests for regional banks as part of an effort to reassure investors that lenders have sufficient capital. The results are scheduled to be released at 12:00 p.m. E.S.T. Also, Italian Prime Minister Silvio Berlusconi faces a final confidence vote today on an austerity package that aims to balance the budget in 2014 and shield the nation from the region’s debt crisis. In the interim, expect the higher-yielding currency to continue to trade with the prevailing risk sentiment.
The Japanese yen continues to hold near recent highs versus the U.S. dollar as threats to the U.S.’s top credit rating have weighed on the greenback. Treasury Secretary Timothy Geithner warned there is no possible extension to the time limit to raise the debt ceiling, while S&P joined Moody’s Investors Service in reviewing the U.S. rating.
The British pound held a tight range against the U.S. dollar, but touched a one month high against the Euro before the publication of stress tests on European banks that may show lenders need to raise more capital than their U.K. counterparts. There was no major economic data released in the United Kingdom today.
