NEW YORK ( TheStreet) -- The U.S. dollar was paring gains against the yen during Asia-Pacific trading hours, but the Australian dollar continued slipping against the greenback after bad economic news hit the currency markets on Thursday.

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The U.S. dollar was trading flat at 82.87 yen during Asia-Pacific foreign exchange hours after hitting a three-week high of 83.22 yen during New York hours.

On Thursday, a softening of the yen set in after Standard & Poor's cut Japan's sovereign debt rating for the first time in nine years, citing the country's lack of a coherent plan to reduce its national debt.

Standard & Poor's cut its credit rating for the country by a notch to "AA-", three notches under the highest possible rating.

Japan's debt currently sits at 200% of its gross domestic product (GDP). That's even higher than Greece's debt load of 140% of GDP; Greece has been poster child for Europe's debt contagion woes.

"The big story today would be the Australian dollar because of the tax and the yen because of the downgrade," Brown Brothers Harriman's global head of currency strategy Marc Chandler had said on Thursday.

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