Moody's said on Wednesday that it may cut Spain's "Aaa" local and foreign currency government bond ratings by as much as two levels after a three-month review.

Moody's, the only major rating agency that still holds a top rating for Spain, said the possible downgrade reflects deteriorating short-term and long-term economic growth prospects, and the challenges Spain faces in achieving its fiscal targets.

The rating agency also cited concerns over the impact of rising funding costs over the medium term.

"If at the conclusion of the review, Spain's ratings are lowered, it would most likely be by one, or at most two, notches," Moody's said.

Fitch Ratings cut Spain's credit ratings to "AA-plus," the second highest level, from "AAA" on May 28, saying its economic recovery would be more muted than a government forecast, pushing world equities and the euro lower.