The dollar steadied in Asia on Friday after the impact from a Standard and Poor's warning that it could cut US credit ratings was short-lived, and investors bought back the US currency as they shifted their focus to stress tests on European banks. The ratings agency warned there was a one-in-two chance it could cut US ratings if no deal was reached on raising the government's debt ceiling.
The dollar briefly came under selling pressure, but the impact was short-lived, perhaps because Moody's had already raised the possibility of a downgrade. Dealers said the market might also be hoping that the pressure from the agencies would jolt US lawmakers into doing a deal.
"The impact from S&P's move is very limited. Obviously, it's not great for the dollar, but contrary to what many people think, it's not such a grave development," said Osamu Takashima, chief forex strategist at Citibank in Tokyo. The euro briefly advanced to $1.4199, but investors turned wary of bidding up the single currency ahead of the result of Europe-wide stress tests on 90 banks due at 1600 GMT which could force some to seek state aid.
As a result, the euro was holding in a tight range around $1.4169 by late Asian trade, having earlier edged up from an overnight low of $1.4115. The dollar dipped 0.1 percent to 0.8153 Swiss francs, not too far from its record low of 0.8080. The greenback remains 2.5 percent lower against the Swiss currency for the week, and almost 13 percent for the year so far, and dealers are betting on further losses.
The dollar inched up 0.1 percent to 79.20 yen after slipping to a session low of 78.89 shortly after S&P's warning. Tokyo dealers said the dollar quickly advanced above 79 yen after meeting solid bids from importers and retail investors.
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