Forex News – U.S. under credit watch, urged to raise debt ceiling by August

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Three weeks ago, ratings agency Moody’s announced that it has put the U.S. credit rating under review with the threat of a downgrade from its top notch AAA rating if the US government fails to increase its debt ceiling by mid-July. Prior to Moody’s, Standard and Poor’s also warned the US government.

Just a couple of days ago, another ratings agency, Fitch, mentioned that if U.S. policy makers do not raise the debt limit then it will place the US on a negative rating watch. Fitch reiterated these warnings today but added that they believe that the U.S. government is “very likely” to raise the debt ceiling limit before Aug. 2.

The head of Fitch’s Asia-Pacific Sovereigns team, Andrew Colquhoun, said in an interview in Singapore today that “The U.S. Treasury is saying that if the debt ceiling is not raised by Aug. 2, then they can’t guarantee that they will remain current on their obligations,”

He added that “If the debt ceiling has not been raised by then, then we would put the U.S. sovereign ratings on rating watch negative. We think it’s very likely that the debt ceiling will be raised in good time.”

Meanwhile, Timothy Geithner, U.S. Treasury Secretary commented how important it is to raise the $14.3 trillion debt ceiling by Aug. 2 or face catastrophic effects. He said that borrowing costs will rise sharply after the current borrowing authority would be exhausted by the said date.