Tags: Dollar

Dollar Climbs As Fitch Downgrades Spain's Rating

Friday, 28 May 2010 06:05 PM

The dollar climbed against the euro and other major currencies Friday after another ratings agency downgraded Spain's debt.

Fitch Ratings cut the country's rating by one notch and said its government's efforts to reduce debt would weigh down economic growth. Earlier this month, Standard & Poor's also lowered its rating of Spain's debt. The government debt of Greece and Portugal has also been downgraded.

The euro has been battered by worries over Europe's debt crisis, and has traded near the four-year low of $1.2146 that it reached last week. The euro rose as high as $1.2452 early Friday before retreating to $1.2287 in late afternoon trading, compared with $1.2378 late Thursday.

"The euro is of course taking it on the chin and has given up all of today's gains," said Brown Brothers Harriman currency analyst Win Thin. "Spain is coming increasingly into the crosshairs due to negative developments in its banking system, and the lines of contagion from Greece are growing."

On Thursday, Spain's Parliament approved emergency austerity measures to cut the country's soaring deficit. The package, which includes a cut in civil servants' salaries, aims to reduce spending by 15 billion euros this year and next.

Spain is the No. 4 economy in the 16-nation euro monetary union.

The euro has dropped about 15 percent against the dollar this year as traders take a dimmer view of Europe's prospects and the strangling effect of deep government spending cuts. Indebted European countries are cutting spending to get their budgets back in line with European Union mandates.

In other late trading Friday, the British pound dropped to $1.4463 from $1.4588 late Thursday. The dollar inched up to 90.88 Japanese yen from 90.84 yen and climbed to 1.1579 Swiss francs from 1.1504 francs.

The dollar advanced against currencies from countries that are big commodity exporters, which tend to gain as traders opt for riskier bets.

The dollar rose to 1.0510 Canadian dollars from 1.0505 Canadian dollars and climbed against the Australian and New Zealand dollars, the Scandinavian currencies and the Brazilian real.

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