The downgrade gave Asian stocks some cause for concern, with China's Shanghai Composite index falling more than one per cent before paring losses, while MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3 per cent.
Moody's Investors Services downgraded China's long-term local and foreign currency issuer ratings before China's markets started trading on Wednesday, citing expectations that the country's financial strength would erode in coming years.
Ratings agency Moody's has downgraded China's credit rating for the first time in 30 years as fears grow that the Asian superpower's economy will experience a major slowdown.
It added that the moves are "underestimating the Chinese government's ability to deepen supply-side structural reform and appropriately expand aggregate demand". Japan's Nikkei rose 0.66 percent and emerging market stocks rose 0.05 percent. On Wall Street, futures for the Dow Jones Industrial Average and Standard & Poor's 500 index were up less than 0.1 percent.
While China's leaders acknowledge the necessity for effectively containing financial risks and asset bubbles, financial authorities wary of knocking economic growth, are not ready to raise short-term interest rates and tighten regulation. She said the risks to China's financial system were "broadly balanced".
The Australian dollar lost almost half a percent on the news but in early European trade had recovered to trade just 0.2 percent lower at $0.7460.
U.S. Treasury Secretary Steven Mnuchin said he hoped to get tax reform passed this year, though this would not happen by August.
For the day ahead, the Dollar will be in the limelight once more, though this time around it will be monetary policy in focus, with the FED's monetary policy meeting minutes scheduled for release.
Gold for June delivery on the Comex division of the New York Mercantile Exchange eased 0.30% to $1,251.69 a troy ounce. But economists say they expect it to cool down in coming quarters as government stimulus measures fade. With prices likely to fall because of an oversupply in the market if they don't, both Russian Federation, and OPEC oil giant Saudi Arabia have spoken out in favor of an extension ahead of Thursday's meeting. USA crude was up 0.6 percent on the day at $51.79 per barrel and Brent crude futures were up 0.7 percent at $54.52.
The euro was 0.03 percent lower at $1.1179.