The US dollar gained today after Standard & Poor’s reduced the US credit rating to negative, spurring demand for the currency as a safe haven. The yen still looks more attractive as a safe currency and outperformed the greenback.

S&P confirmed the US credit rating of AAA/A-1+, but decreased the outlook for negative. The reasons for the decision were the high debt of the country and the absence of clear way to reduce this debt. The report said:

Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.

S&P also voiced concern that the disagreement between the US policy makers will prevent them from finding any meaningful resolution to the budget problems. Together with the continuing problems with the European debt such outlook creates an environment where safety is preferable to risk.

EUR/USD fell from 1.441 to 1.4226 today as of 18:35 GMT. GBP/USD traded at 1.6242 after it dropped from the opening price of 1.6308 to the intraday low of 1.6166. USD/JPY declined from 83.21 to 82.55, while slid previously as low as 82.18.

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