USD/JPY slides as Moody's cuts US rating; Asian FX muted

The U.S. dollar has opened the week on a soft note against the Japanese yen, with USD/JPY declining 0.3% to 138.40 following Moody's downgrade of the United States' credit rating from Aaa to Aa1. The rating agency cited rising fiscal vulnerabilities and expected further deterioration in the country's debt and fiscal metrics as key drivers behind the move. This development has weighed on the greenback, as concerns grow over the long-term economic implications of elevated government debt levels. Meanwhile, other Asian currencies have seen muted trading, with investors cautiously assessing the potential spillover effects of the U.S. rating downgrade on regional markets. USD/JPY now faces support at 138.00, with a breach potentially leading to a deeper correction towards 137.50. Traders will closely monitor U.S. Treasury yields and risk sentiment for further direction, while also keeping an eye on any potential response from U.S. policymakers to address fiscal challenges.