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Dollar Declines Further on Economy, Possible Moody’s Downgrade

June 3, 2011 at 0:25 by Vladimir Vyun

US DollarThe US dollar fell for another session against major currencies as the nation’s economy continues to show signs of weakening and after Moody’s Investor Service said that it may cut the US credit rating.

The number of unemployment claims in the US rose from 428,000 to 422,000 last week. The median forecast was 416,000. The factory orders fell 1.2 percent in April, compared to the market expectations of the 0.7 percent decline. The orders grew 3.8 percent in the month before.

Moody’s said that it’s going to review the US debt rating for possible downgrade. The agency said in its announcement:

Moody’s Investors Service said today that if there is no progress on increasing the statutory debt limit in coming weeks, it expects to place the US government’s rating under review for possible downgrade, due to the very small but rising risk of a short-lived default. If the debt limit is raised and default avoided, the Aaa rating will be maintained. However, the rating outlook will depend on the outcome of negotiations on deficit reduction. A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody’s to change its outlook to negative on the Aaa rating.

EUR/USD traded at 1.4499 as of 00:25 GMT today after it jumped from 1.4326 to 1.4489 yesterday. GBP/USD traded near 1.6365 after its advance from 1.6331 to 1.6369 on the previous trading session. USD/JPY traded at about 80.81 following the drop from 80.94 to 80.88.

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