| US losses AAA rating |
| Written by Mansi |
| Monday, 08 August 2011 05:30 |
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S&P downgraded its rating on the US by a notch to AA+ with a negative outlook. The rating agency stated that they felt that the political system of the economy has become less stable and that budget cutting announced earlier will not be enough.
S&P in July had stated that $4 trillion in cuts over a decade will be required if US were to have its AAA rating. On August 2 the policy makers agreed to enforce $2.4 trillion in spending restriction over the next 10 years. US has $14 trillion of debt and even after the deal last week it is anticipated to add another $7 trillion over the decade. As per the S &P analysis the US Debt to GDP ratio will rise to 74% by year end, 79% in 2019 & will hit 85% in 2021.
Moody’s and Fitch Ratings affirmed the AAA ratings on 2nd of August after the increase of the debt ceiling, they also said that downgrades were possible if lawmakers fail to enact the debt reduction measures and the economy weakens.
The AAA sovereign ratings holders are Australia, Austria, Canada, Denmark, Finland, France, Germany, Luxembourg, Norway, Singapore, Swiss Confederation, UK and Hong Kong.
The AA rating holders are Abu Dhabi, Belgium, Bermuda, Chile, China, Japan, Kuwait, Qatar, Saudi Arabia, Slovenia, Spain and Taiwan.
The rating downgrade is likely to weaken the dollar against other currencies. The dollar has already been losing against major currencies like Yen and the Swiss Franc.
The dollar’s status as the global reserve currency is fading. The dollar’s portion in the global currency reserves dropped to 60.7% in March 2011, which was at 72.7 % in the year 2001
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| Last Updated on Friday, 28 October 2011 11:48 |
