LONDON — The euro rose against the dollar on Tuesday as Moody's downgraded Greek sovereign debt but said the country faced only limited risks in the short term. In London morning deals, the single currency climbed to 1.4315 dollars from 1.4281 in New York late on Monday. Against the Japanese currency, the dollar rose to 91.25 yen from 91.15 yen on Monday. Moody's Investors Service downgraded Greek government bond ratings on Tuesday as the debt-ridden country struggles to restore its credibility in international markets. Moody's became the third international credit rating agency to downgrade Greece's sovereign debt this month following similar action by Fitch and Standard & Poor's. But the agency said the eurozone country faced "very limited" short-term liquidity risks. "The Greek government's credit challenges are of a longer-term nature," said Sarah Carlson, Moody's lead sovereign analyst for Greece. "They stem from a slow erosion in competitiveness and economic potential, which implies that the government's debt problem cannot be resolved by growth alone," she said. Moody's lowered its bond ratings to A2 from A1, a blow that was not as harsh as that inflicted by Fitch and Standard and Poor's and which keeps Greek bonds in safe territory with regard to the European Central Bank's minimum lending requirements. The move by Moody's came as Greek lawmakers were debating a 2010 budget that aims to cut Greece's big public deficit and restore the country's credibility in international markets and the eurozone. The government has unveiled austerity measures to reduce the deficit to 9.1 percent of output in 2010 -- sill exceeding the limit of 3.0 percent for countries that use the single European currency. Elsewhere, the dollar rose against the yen, supported by mounting expectations that the US central bank will be quicker than its Japanese counterpart to raise interest rates, dealers said. The dollar benefited from growing speculation that the Federal Reserve will raise interest rates next year earlier than predicted. Investors generally prefer currencies offering the prospect of higher yields. In contrast, Japan's central bank has raised expectations that it will keep its key lending rate at the current level of 0.1 percent for some time yet, declaring last week that it "does not tolerate" deflation. But some analysts were sceptical about whether the dollar's rally would continue for much longer. "We expect the dollar's recovery to stall any time now and anticipate another bout of weakness in the first quarter" of 2010, Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong, wrote in a note. Meanwhile the British pound fell as official data showed Britain remains the last major economy in recession. The Office for National Statistics said that British gross domestic product (GDP) contracted by 0.2 percent during the third quarter compared with the previous three-month period. It had previously put the contraction at 0.3 percent, while analysts' consensus forecast had been for a revision this time around showing GDP shrinkage of only 0.1 percent. In London, the euro was changing hands at 1.4315 dollars against 1.4281 dollars late on Monday, 130.63 yen (130.17), 0.8939 pounds (0.8896) and 1.4982 Swiss francs (1.4938). The dollar stood at 91.25 yen (91.15) and 1.0466 Swiss francs (1.0458). The pound was at 1.6014 dollars (1.6050). On the London Bullion Market, the price of gold fell to 1,095.40 dollars an ounce from 1,105.50 dollars late on Monday.

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