The dollar fell against most major currencies on Friday after a major rating agency warned that it may cut credit rating of California.

The state, which is responsible for 13 percent of the U.S. GDP, is facing a possible "multi-notch" downgrade if its legislature fails to act quickly to produce a budget, Moody's Investors Service warned on Friday.

California's revenues have been on a dramatic slide as a result of the economic recession. It is struggling to fill a budget deficit of 24.3 billion dollars.

The state's controller has said California won't be able to make some payments starting next month unless a budget fix is reached.

California's current credit rating with Moody's is A2, the sixth-highest investment grade in Moody's rating system and only four steps above junk territory. It makes California the lowest rated of the 50 U.S. states.

A White House spokesman said earlier this week that the federal government would not help California to overcome the budget crisis. Standard& Poor's, another major rating agency, warned on Tuesday that California is at risk of a downgrade.

The debt problem of California deepened worries about on the overall U.S. budget, driving the dollar lower.

Investors are now waiting for the decision from the monetary policy meeting of U.S. Federal Reserve and home sales data, both due next week.

The euro bought 1.3956 dollars in late New York trading compared with 1.3903 dollars it bought late Thursday. The pound rose to 1.6518 dollars from 1.6350 dollars.

The dollar rose to 1.1345 Canadian dollars from 1.1330 Canadian dollars, and fell to 1.0797 Swiss francs from 1.0858 Swiss francs. It fell to 96.19

Japanese yen from 96.60 Japanese yen.

(Xinhua News Agency June 20, 2009)