Forexpros – The U.S. dollar was down against the yen on Monday, sliding to a two-day low after Standard & Poor’s downgraded the U.S. debt rating for the first time in history, boosting demand for safe haven assets.
USD/JPY hit 77.73 during late Asian trade, the lowest since August 4; the pair subsequently consolidated at 77.86, retreating 0.76%.
The pair was likely to find support at 76.95, last Thursday’s low and short-term resistance at 79.41, last Friday’s high.
The dollar weakened after ratings agency Standard and Poor’s downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed Friday.
The ratings agency kept the U.S. rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and “America’s governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed.”
Meanwhile, Japanese Finance Minister Yoshihiko Noda signaled that the country was ready to continue intervening in currency markets to stem the yen’s strength.
But rating agency Moody’s warned that Tokyo’s efforts to weaken the yen were ineffective and negative for its sovereign ratings.
Last Thursday, Japan intervened to curb the yen’s gains for the first time since March. In addition, the BOJ announced additional monetary easing to further bolster growth, pledging to buy more assets such as stocks and bonds.
The yen was also higher against the euro, with EUR/JPY shedding 0.22% to hit 111.78.
The European Central Bank said late Sunday that it “will actively implement” its bond-buying program, indicating that it will likely buy Spanish and Italian government bonds in an attempt to ease investors concerns over the region’s ongoing debt crisis.
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