Forex, What Is The Moodys Rating?

What Is The Moodys Rating?

Current information on the capabilities of countries to repay their obligations under the agency Moody’s, S & P or Fitch. The marks from the rating agencies have prepared for you in a table. Decrease or increase the rating of each state can significantly move the currency of the country and is therefore fundamental for Forex traders the information important. For example, recently we have seen a downgrade of Greece, which almost always led to at least a temporary weakening of the euro.

What is the rating?
rating means the international standard measurement tool (evaluation) the creditworthiness of countries to assess their credibility. Rating reflects the degree of business risk for foreign companies rated in the destination and quantify the probability that the evaluated country will honor its commitments. The award is an expression of the quality of the state as a debtor and its economic ability to meet its own obligations issued and repaid on time and in full amount of principal and interest owed.

History rating
history as a rating service is closely related to the development of the financial market of the United States of America. The beginning of rating can be considered the year 1909, when John Moody started to evaluate the bonds of railway companies (which at that time was very important sector of the economy). Soon after he began using this type of assessment bonds for utilities and industrial companies. Among the first agencies also belonged Poor’s Publishing Company, which issued its first ratings in 1916, and Standard Statistics Company, and Fitch Publishing Company, whose ratings followed in 1922. Gradually, the rating market evolved so that today there are three leading global rating agency

The best-known agencies and evaluators
credit Determination country set 3 major credit rating agency, whose main advantages are the independence and adequate analytical capacity, and which are referred to as the “Big Three”. These include: Standard & Poor’s, Fitch-IBCA Moody’sa ( Fitch Ratings ). These agencies from the USA, which operates worldwide, and their evaluation is internationally recognized. The activities of these agencies are the most important independence and credibility. In order for the agency become a recognized, must be able to respond to changing market demand internationally.

Moody’s
agency was founded in 1914 by John Moody and between other agencies is approximately 40% market share. In addition to ratings surveys carried out by economic and financial analysis of commercial and government entities, and provides risk management software for financial institutions. The company has approximately 4,000 employees in 27 countries.

Standard & Poor’s
company was founded in 1941, merger of Standard Statistics Company and Poor’s Publishing Company. It focuses on providing many financial services. In addition to ratings and other evaluations performed its own economic surveys, produces some of the S & P index and is one of the world’s leading providers of independent information about investment. Its branch offices in 23 countries and market rating has approximately 40%.

Fitch Ratings
Company was founded in 1913 by John Knowles Fitch and Fitch Ratings today is one of the three parts of the financial Fitch Group. Fitch Ratings is an international rating agency, Fitch Solutions, a company providing consulting and financial services sector and Algorithmics Inc.. deals with software risk management. Fitch Ratings has smaller market share than its predecessor agencies – approximately 16%.

Using rating
rating mainly used by investors, issuers, investment banks, brokers and state institutions. Investors extend credit rating agency of investment opportunities and provide independent and easy to use assessment of the relative credit risk. This significantly increases market efficiency and reduces costs for investors (the costs associated with the analysis of issuers, etc.) Investment banks and brokers use the ratings in calculating their risk portfolio. Even if self-assessment results to compare their assessment of credit rating agencies. For the average forex trader (trader), it is important to take into account the rating of states only to short-term weakening or strengthening of the currency, reduce or increase the rating of the appropriate state rating agency. For example, through debt and nelepšícím the conditions in Greece may reduce the credit rating agency evaluations of Greece, which can lead to rapid short-term weakening of the EUR / USD for example, about 60 pips, etc.It is similar to using a daily calendar of economic events and is therefore an event that may cause significant short-term movements of prices. During the report of a downgrade could increase volatility in the market several times, which means movements from several to tens of pips pips in a matter of seconds.
The methodology of rating country
rating determination in the case of State focuses on two broad areas, namely the political and economic risk :

• political risk, which reflects the willingness to repay debt
• economic risk, reflecting the ability to repay debt

In drawing up the rating agency cooperates with the key institutions of the state (central bank, ministries, government agencies, trade unions, etc.). Based on information obtained State having jurisdiction shall mark, which corresponds to the risk of the country – on a scale from A (highest quality bonds) in C or. D (very riskybonds , which have hardly a chance to become investment opportunities). Rankings country assessments Highest receive long-term rating of the most advanced country in the world offering investors a stable economic growth economy with low inflation, unemployment, an educated population and good infrastructure. On the other freezes is a country with high debt, the economy faces serious problems and total insolvency. Global rating scale

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