Forexpros – The euro held gains against the U.S. dollar on Thursday, after ratings agency Fitch downgraded Portugal’s sovereign rating to junk status, citing large fiscal imbalances and high debts.
EUR/USD hit 1.3411 during European early afternoon trade, the daily high; the pair subsequently consolidated at 1.3404, gaining 0.46%.
The pair was likely to find support at 1.3319, Wednesday’s low and a seven-week low and resistance at 1.3530, Wednesday’s high.
Fitch cut Portugal to BB+ from BBB-, saying it expects gross domestic product to contract by 3% in 2012, making the government’s deficit reduction plan far more challenging to execute.
“The country’s large fiscal imbalances, high indebtedness across all sectors, and adverse macroeconomic outlook mean the sovereign’s credit profile is no longer consistent with an investment-grade rating,’ Fitch said.
The euro eased off a seven-week low against the greenback earlier, after a report showed that German business confidence improved unexpectedly in November, indicating that the euro zone’s largest economy is coping with the region’s debt crisis better than experts had feared.
German research institute Ifo said its Business Climate Index rose to a seasonally adjusted 106.6 in November from 106.4 in October.
Analysts had expected the index to fall to 105.5.
Sentiment on the single currency soured on Wednesday after the least successful German bond sale since the launch of the single currency sparked concerns over contagion to core euro zone economies.
The euro was also higher against the pound, with EUR/GBP rising 0.21% to hit 0.8612.
Meanwhile, markets in the U.S. were to remain closed on Thursday for Thanksgiving.
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