Reuters: US Dollar Report: FOREX-Dollar drops vs yen after Fitch puts U.S. rating on credit watch

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FOREX-Dollar drops vs yen after Fitch puts U.S. rating on credit watch Oct 15th 2013, 21:44 Tweet Share this Email Print Reprints Tue Oct 15, 2013 5:44pm EDT * Fitch places U.S. rating on credit watch * Senator Durbin says U.S. Senate talks suspended * Markets eye Oct. 17 deadline * Dollar hits session low vs yen By Gertrude Chavez-Dreyfuss NEW YORK, Oct 15 (Reuters) - The dollar fell against the yen and trimmed earlier gains versus the euro after Fitch late on Tuesday placed the United States' triple A rating on credit watch after negotiations to raise the nation's debt ceiling and end the government shutdown sputtered. The ratings agency said it made the move because U.S. authorities have not raised the federal debt limit in a "timely manner." "The dollar doesn't like this, but I think a lot of people have gone home and equities are closed. But what you can be sure is that China will pay very close attention to this rating," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. "I would expect comments from China and Japan regarding their frustration over the lack of conclusion of the U.S. debt talks. It certainly poses concern for those with dollar holdings." China is the largest foreign holder of U.S. government debt and Japan is close behind. Borthwick had expected Fitch's action, after U.S. Senate Majority Leader Harry Reid, a Democrat, said late on Monday that the United States could face negative ratings action as early as Tuesday night. The Senate on Tuesday also halted discussions on its own plan and is waiting for the Republican-controlled House of Representatives to come up with an alternative proposal before Thursday, when the U.S. Treasury says the government will reach its borrowing limit. This brings the world's largest economy closer to potentially defaulting on its debt obligations. Senator Richard Durbin, the second-ranking Democrat in the Senate, said Senate Republican leader Mitch McConnell would have to wait for some signal on the next steps from House Speaker John Boehner before he takes any further moves. "Completion of a debt ceiling agreement before the Thursday Treasury deadline appears increasingly unlikely, and market stress is likely to build further in the days ahead," said Vassili Serebriakov, currency strategist at BNP Paribas in New York. The dollar fell to session lows against the yen at 98.07 yen following the Fitch move. Earlier, it hit a two-week high of 98.72 and was last at 98.34 yen, down 0.3 percent. The dollar also trimmed gains against the euro after the ratings action. The euro, however, ended the day down 0.3 percent at $1.3523. ------------------------------------------------------------ Treasury bill maturing Oct. 31 seen as at-risk of missed payment due to debt limit crisis.------------------------------------------------------------ Yields on two-year Treasury notes issued nearly two years ago and maturing on Oct. 31 rose to just over 0.7 percent from near zero percent. Prompt payment of the principal due on Oct. 31 was seen at risk due to the potential failure to raise the U.S. debt limit. Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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