Sterling fell on Tuesday after a ratings agency said highly-indebted Britain was the major economy most at risk of losing its triple-A rating. The pound retreated from a three-month high against the dollar hit on Monday, after Fitch told Reuters Britain would have a tougher time than the United States in sustaining its fiscal deficit without impacting interest rates or the currency.
A further significant fiscal stimulus package could put the coveted rating at risk, it said. As the UK government borrows heavily to pull the economy out of recession, its weak fiscal position has plagued sterling, and traders often sell the currency on any suggestion Britain may lose its top-notch rating. Only Britain, the United States, Germany and France are among the major economies are rated AAA and any change could affect the cost of government borrowing.
"Fitch highlighted what the market is fully aware of - the deterioration in the UK's fiscal position," said Ian Stannard, currency strategist at BNP Paribas in London. "Ratings agencies have been warning that the UK has to get its house in order." Cable fell as much as a cent and half to $1.6600 after the Fitch comment, pulling away from a three-month high of $1.6844 hit on Monday. By 1514 GMT, it had pared losses to trade at $1.6730, around 0.1 percent lower on the day. The pound fell against the euro, which rose 0.1 percent to 89.60 pence. Earlier in the day, sterling touched 90.18 pence per euro, its weakest in a week.
Comments
Comments are closed.