LONDON (Reuters) - The reaction by financial markets on Monday to the loss of Britain's triple-A credit rating with ratings agency Moody's showed the government still had the confidence of investors, Chancellor George Osborne said.
"The credit rating is an important benchmark for any country but this government's economic policy is tested day in and day out in the market, and it has not been found wanting today," Osborne told parliament.
"I would say the credit rating agencies are important but they are one test," said Osborne who has been lambasted by opposition MPs for having promised in the past to protect Britain's top-notch credit rating.
"It is important but it is just one test of the government's economic credibility in the market and that is tested by the gilt yields, by the value of sterling, by the ... stock market and all sorts of other things, and as I say, today we have not seen excessive volatility," Osborne said.
He was appearing in parliament to answer a question from the Labour Party opposition about the downgrade announcement by Moody's late on Friday.
The pound fell moderately, hitting lows against the dollar not seen since July 2010. The euro rose against sterling to its highest since October 2011.
Ten-year British bonds, or gilts, initially sold off sharply but later regained most of their losses. British stocks were broadly higher, lifted in many cases by prospects of greater exports from a weaker currency.
(Reporting by David Milliken and Li-mei Hoang, writing by William Schomberg; Editing by Toby Chopra)