Moody's on Wednesday cut Portugal's sovereign debt rating by two notches to A3 and said it might have to downgrade again given the impact of high borrowing costs and the difficulty of meeting tough fiscal targets.
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AP |
The euro [EUR=X 1.3982 
-0.0014 (-0.1%) 
]dipped only slightly on the news, which was widely anticipated and largely overshadowed by the gathering nuclear crisis in Japan, which has seen a massive flight to safety in global markets.
Moody's said it still held a negative outlook on Portugal's bond ratings as it considers a further downgrade to be more likely than an upgrade over the coming one to two years.
The rating agency said it was concerned about the high interest rates the government might have to pay to borrow on capital markets and what those rates could mean for the economy as a whole.
It also questioned how successful the government would be in achieving the tough fiscal targets it has set itself going forward.
And it cited uncertainties over how much support the government would have to provide to the country's banks and government-related issuers. Read more
With the current Japanese tragedy heightening risk aversion in the markets, there would be little chance that ECB will raise rates in the short run. Spain the least exposed to the debt problems in the PIGS category. At govt yield of 4.2%, they seem to be able to make it out of the crisis in whole.
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