US credit rating at risk, dollar strikes high

Published May 25th, 2023 - 10:42 GMT
US credit rating at risk, dollar strikes high
The United States dollar - Source: Shutterstock

ALBAWABA – The United States (US) dollar hit a two-month high in Europe on Thursday, as credit rating agency Fitch warned US credit rating may be facing downgraded in light of the ongoing US debt ceiling crisis.

The US dollar index hit 104.05 against a basket of foreign currencies in the European market early on Thursday, before slipping slightly to 103.94, at exactly 12:45 Riyadh time, according to

Overall, the dollar made a 0.13 percent climb to its highest level since mid-March.

Demand on the US dollar is rising as US debt ceiling talks hit an impasse, with more investors and traders buying into the dollar as a “safe haven”, the financial platform explained.

According to Bloomberg, traders have been selling US Treasury Bill on higher yields, as interest rates rose on two and ten-year bills.

Meanwhile, tensions around the US debt ceiling talks rose after Fitch Ratings warned about the country’s AAA credit rating being under threat.

US credit rating at risk, dollar strikes high
The credit rating of the US is threatened by the ongoing debt ceiling crisis - Source: Shutterstock

New York-based news outlet Bloomberg highlighted that the ongoing political standoff between US President Joe Biden’s Administration and Congress is preventing the realization of a deal.

The US reached is debt cap in January, 2023, and has since been spending out of the Treasury Department’s extraordinary measures allocations.

In previous statements, the treasury warned that the department’s cash allocations are depleted.

In the meantime, time is running out for the US government to secure a deal for raising the debt ceiling before June 1, which is the deadline for substantial payments on bills due.

Fitch may downgrade the US assessment to reflect the increased partisanship that is hindering a resolution despite the fast-approaching deadline, the rating agency said in a statement Wednesday.

Markets have been showing increasing nervousness over the standoff, Bloomberg reported.

Rising premiums on Treasury bills maturing at the risk of default is highest the US has seen in a very long time, the economic news agency highlighted.

More so, the S&P 500 Index has declined for two consecutive days, according to Bloomberg, while economists project a US default could trigger a recession.

Such a recession would cause widespread job losses and a surge in borrowing costs, both inside the US and beyond. 

Fitch’s warning “underscores the need for swift bipartisan action by Congress to raise or suspend the debt limit and avoid a manufactured crisis for our economy,” said Lily Adams, a spokesperson from Treasury. 

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