AUD & NZD Feel Weight of Spain’s Downgrade

The Australian and New Zealand dollars retreated today after Standard and Poor’s cut Spain’s credit rating yesterday, damping risk appetite on the Forex market.

S&P downgraded Spain’s long-term debt rating from AA to AA- yesterday and issued a negative outlook. This decision spoiled the otherwise bullish week for the euro and higher-yielding currencies. The promise of the European leaders to find a way out from the current unpleasant situation with the sovereign debt supported the optimistic mood during this week, but there isn’t any solid plan to deal with the issue yet and any bad news can easily turn sentiment from optimism to pessimism. Whether a change of trend occurred today or markets just decided to take a breather before the weekend remains to be seen.

Economists believe that Europe’s problems aren’t going to disappear anytime soon and will continue to influence markets. It may be not completely bad for the currencies of Australia and New Zealand as traders would search for alternative assets to invest in and the Aussie and the kiwi may present an attractive investment opportunity.

AUD/USD fell from 1.0189 to 1.0167 today as of 2:57 GMT, following the drop to 1.0143. NZD/USD dropped from 0.7946 to 0.7927, while reached the low of 0.7907 earlier.

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