Moody's Investors Service said on Tuesday that the U.S. government's triple-A credit rating was safe but added that it could be at risk if Washington were unable to bring its public debt back to a downward trajectory.
Financial markets have repeatedly been spooked this year by concern that triple-A rated governments such as the United States and Britain could face credit ratings downgrades as they borrow heavily to spend their way out of recession.
The U.S. government triple-A is safe, Pierre Cailleteau, team managing director of Moody's Sovereign Risk Group, said at a media briefing on sovereign credit ratings held in Tokyo.
Moody's has a stable outlook on the U.S. rating, which indicates a change is not expected over the next 18 months.
Replying to a question about the sovereign rating of the United States, Cailleteau said the U.S. rating remains a solid triple-A.
But he added that there were possible risks that could lead to a downgrade.
That will happen for two reasons. Either our assumptions in terms of debt reversibility prove to be wrong. That is, in fact the U.S. government is unable to bring public debt back to a downward trajectory, he said.
The other reason would be if the United States' ability to raise a large amount of debt at a low cost were to be put at risk, Cailleteau said.
It could be put at risk if the U.S. dollar was severely challenged as the main international reserve currency, he said.
But the possibility of the dollar being replaced as the main international reserve currency in the near future was a pretty remote risk, he added.
Debate has flared in the past few months about the dollar's status as the world's reserve currency at a time when the United States' debt issuance is ballooning to pay for financial and economic rescue programs.
The bulk of the world's foreign exchange reserves are held in dollars, and Russia, the holder of the world's third-largest reserves after China and Japan, has repeatedly called for less global reliance on the dollar.
Moody's Investors Service said in May that it was comfortable with the triple-A sovereign rating on the United States, but it was not guaranteed forever.
It also warned in May that if the United States failed to reduce current debt levels once economic growth returned, the triple-A rating could come under pressure.