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Junk status credit rating hurts Portugal's funding efforts

Economic problems in Greece and Portugal could hurt the euro.

Soon after Moody's reduced Portugal's credit rating to junk status, it had to respond to investors who said better return rates were necessary if the country hoped to receive more funding, Agence France-Presse reports.

Moody's stated that it had downgraded the country's rating because of a "growing risk that Portugal will require a second round of official financing" in order to raise money in the private market.

Analysts from the French broker Aurel BGC told the news source that Moody's may adopt a policy of automatically downgrading sovereign ratings when it came to countries that need bailouts from European agencies, such as the EU and the International Monetary Fund.

Most likely, the country will see greater challenges in its fundraising efforts as a result of the credit rating.

"The banks and companies are going to have a much more difficult time in raising finance," said Cristina Casalinho of BPI bank in an interview with AFP.

Reuters reports the credit downgrade news from Portugal put pressure on stock markets worldwide. The economic woes of Portugal and Greece have sent investors looking for safer investments than the euro - which dropped 0.7 percent to approximately $1.43021 - including the Swiss franc and Japanese yen.