Following a warning of a possible downgrade from Moody’s credit ratings service, the U.S. Dollar Index fell close to the 4-month low of 79.87 .DXY, trading at 1:15 p.m. (JST) at 79.784 .DXY during the Asian trading session. Moody’s reported that the United States was in jeopardy of losing its AAA debt rating if 2013 budget talks failed to produce policies that would reduce their massive debt. U.S. Congressman John Boehner said that, given the division between the Democratic and Republican parties, he was not sure that the government could avoid a so-called “fiscal cliff” which might trigger a recession. Analysts say that while most investors understood that a credit cut was always a possibility, the timing of the announcement caught traders by surprise.
The EUR/USD pair is also hovering near a multi-months high, trading at $1.2862, only a few pips from Tuesday’s high. Analysts say that there is the possibility that the gains could improve if the German Constitutional Court rules in favor of Germany’s participation in the E.U. bailout fund; a ruling is expected shortly. Also providing some support to the Euro is the growing probability that the U.S. Federal Reserve will be announcing additional stimulus measures to provide a much-needed boost to the U.S. economy; that announcement is expected on Thursday.