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BloombergMoody’s Investors Service reiterated that it affirmed the U.S.’s top Aaa ranking because the dollar’s status as the main reserve currency allows it to support higher debt levels than other countries, the rating firm said today in a report.
The dollar as the main reserve currency, “unique to the U.S., provides unmatched access to financing, meaning that the U.S. government can support higher debt levels than other governments,” Moody’s analyst Steven Hess wrote today. “While comparisons of government debt ratios form an important part of our rating analysis, the status of the dollar and the U.S. government debt market need to be taken into account when making such comparisons. Over time, the dollar’s role may be eroded, but we see no immediate threat.”
Standard & Poor’s cut the U.S. from AAA by one level to AA+ while keeping the outlook at “negative” on Aug. 5, citing the political failure to reduce record deficits. Lawmakers agreed on Aug. 2 to raise the nation’s $14.3 trillion debt ceiling and put in place a plan to enforce $2.4 trillion in spending reductions over the next 10 years, less than the $4 trillion S&P said it preferred.
“Although the political process has been considerably more contentious than usual in the past few months, it finally did produce an agreement,” Moody’s said. “We expect further fiscal measures over time, albeit with vigorous debate over the particulars.”
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http://www.bloomberg.com/news/2011-08-08/moody-s-affirms-u-s-s-aaa-rating-cites-dollar-s-role-as-reserve-currency.html