LONDON (Reuters) - The dollar may fall and Treasury yields rise on Monday in response to the United States losing its top-tier credit rating from Standard & Poor's but any selling is likely to be tempered by the euro zone's escalating debt crisis. Equity markets' likely reaction was indicated by a drop of more than six percent on Sunday in Tel Aviv stocks, one of the first to open globally after S&P on Friday cut the U.S. long-term credit rating by a notch to AA-plus from AAA.
Investors will be all the more likely to withdraw to safe havens, such as the Swiss franc, the yen and gold, if euro zone officials cannot stem concern that their debt crisis risks engulfing Italy, the bloc's third largest economy, whose government bond yields have soared to 14-year highs. "The real effects of this (U.S. credit rating downgrade) will take time to show through but a weaker U.S. dollar and marginally higher yields are likely," said Charles Diebel, a strategist at Lloyds Bank.
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