In this article, We learn about "Credit Rating".Let's Go!
As with any other security, investors use credit ratings to determine the ability of a debt issuer to repay loans. In Forex, credit ratings primarily refer to sovereign debt or bonds issued by governments to finance public programs and services. The credit ratings we usually see are denoted by letters such as AAA, BB+ or D.
Since sovereign debt is usually denominated in foreign currencies, countries with unstable exchange rates or slow economic growth often have lower credit ratings because they have the added risk of not being able to repay investors. As a result, countries with lower credit ratings generally have to pay more than countries with higher credit ratings to borrow the same amount of money from the market.
Will credit rating decisions directly affect my favorite currency pair?
Since credit ratings play an important role in investors' analysis, any major announcement from a major credit rating agency could directly affect your currency trading.
Note that not all credit rating agencies keep pace with their assessments, which shows that no one rating agency presents the whole picture when analyzing sovereign debt.
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