Saikat Chatterjee
Reuters
Aug 7, 2011
The U.S. dollar may weaken and Treasury yields rise when Asian markets reopen on Monday, though any selling in response to ratings agency S&P’s downgrade of the United States is likely to be tempered by the escalating crisis in the euro zone.
The S&P cut in the U.S. long-term credit rating by a notch to AA-plus is an unprecedented blow and results from concerns about the nation’s budget deficits and climbing debt burden. It called the outlook “negative,” signaling another downgrade is possible in the next 12 to 18 months.
“The initial reaction will be a high degree of uncertainty and thus volatility since investors will not know where to turn for safety,” said Mark Mobius, executive chairman of Templeton Emerging Markets group, in an email to Reuters.
“During the sub-prime crisis safety was in U.S. Dollars and U.S. Treasuries. Now that anchor to the global community is deteriorating,” added Mobius, whose unit oversees $50 billion in emerging market assets.
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