24.05.201700:57:00UTC+00Aussie Hit by China’s Debt Rating Downgrade

The Australian dollar weakened while the yen trimmed losses versus the U.S. dollar after Moody's Investors Service slashed its rating on China's sovereign debt for the first tin in almost 30 years.

The AUD/USD fell 0.4 percent to 0.7450 while USD/JPY advanced 0.1 percent to 111.91 after rallying to as high as 111.99 earlier in the session.

The Aussie was driven down by investors on electronic platforms, according to an Asian-based trader. Westpac said the downgrade jolted investors and the Aussie dollar received the strongest hit as it acts as a liquid proxy for China risk.

The yuan slid and default risk rose after Moody's brought down the rating by a notch from Aa3 to A1, citing the high probability of a material increase in nation-wide debt and increasing liability that the heavy debt will put on the country's financial state.

While the ratings agency had a negative outlook for its prior rating on China, the downgrade was unexpected and is seen to affect sentiment for the Australian dollar in the short-term, according to forex strategists.