The dollar strengthened against the world's major global currencies on Tuesday after Moody's stripped France of its triple-A rating, which wiped out appetite for risk.
Moody's Investors Service earlier said it had cut French sovereign ratings to Aaa1 from Aaa, which sent investors ditching the EUR/USD and commodities to digest the news, which made the dollar the perfect safe haven.
As Moody’s published earlier, “France's long-term economic growth outlook is negatively affected by multiple structural challenges, including its gradual, sustained loss of competitiveness and the long-standing rigidities of its labour, goods and service markets.” Furthermore, “France's fiscal outlook is uncertain as a result of its deteriorating economic prospects, both in the short term due to subdued domestic and external demand, and in the longer term due to the structural rigidities noted above.”
The market kept an eye on the Bank of Japan, which was holding a monetary policy meeting later Tuesday.
The Bank of Japan may hold benchmark interest rates unchanged, though upcoming elections could see opposition leader Shinzo Abe become the next Prime Minister. Abe has called for more aggressive policy action and stimulus from the Bank of Japan.
In other news, foreign direct investment in China fell for the 11th time in 12 months as labour costs rose, a slowdown threatened to drag growth to a 13-year low and a territorial dispute with Japan weighed on trade.
Later Tuesday, the U.S. is to publish official data on building permits as well as data on housing starts, while, the U.S. Fed Chairman is due to deliver a speech titled "The Economic Recovery and Economic Policy" at the Economic Club of New York. Finally today, the Eurozone of finance ministers will hold talks in Brussels to discuss financial issues in the bloc.