The euro decreased sharply on Tuesday against the dollar to $1.3599 following Italy’s debt rating cut by Standard & Poor’s late on Monday.

S&P cut Italy’s credit rating by one notch to A from A+ with a negative outlook. The downgrade by the ratings agency comes amid worries that a “fragile governing coalition” and “weakening economic growth prospects” are pulling Europe’s third biggest economy further into the sovereign debt crisis.

Markets remain volatile as investors await the decision on whether Greece will be granted the sixth tranche, $11bn as part of a bailout, from international lenders.