WASHINGTON: Moody's lowered its credit rating for Argentina by one step Monday, citing a sharp fall in the country's reserves and inconsistent economic policies.
Moody's cut the rating to Caa1 from B3, putting it in the mid-range of "speculative" or junk bonds.
The agency also cut its outlook for Argentina to negative from stable -- a warning that the country could face another downgrade.
Moody's said a sharp fall in the government's foreign exchange reserves, to $27.5 billion from $52.7 billion in 2011, increases the risk that Buenos Aires "may not meet its foreign-currency debt service obligations."
It added that "an inconsistent policy environment" increases the likelihood that reserves will remain under pressure through 2015.
"Argentina is one of the few Latin American countries with a capital account deficit due to persistent capital outflows and a lack of access to international debt markets," Moody's said.
"Lack of confidence in government economic policies, including one of the region's highest inflation rates, will make it difficult to prevent continued capital flight."
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