Foreign Currency Rating
Definition
A Foreign Currency Rating is a Credit Rating where the creditworthiness of an obligor is assessed in terms of ability to repay obligations denominated in a foreign currency
Usage
A foreign currency rating is relevant for both Sovereign Risk and Corporate Credit Rating of entities domiciled and/or operating in regions with significant Country Risk
Rating agencies methodologies typically involve a Foreign Currency Ceiling which gives the highest rating grade available to foreign-currency denominated debt issuer. This rating cap aims to express the likelihood of Country Risk events including FX related risks. Because the likelihood of such events is driven by sovereign decisions, the Foreign Currency Ceiling is usually pegged to that of the Sovereign.
