The dollar fell to a five-month low against the euro Friday as inflationary fears heated up and the market continued to fret over a downgrade of the U.K.'s outlook.

The 16-nation euro traded at $1.4008, up 0.8% from late Thursday when it ended at $1.3891.

The British pound cost $1.5911, up 0.4% from Thursday's close of $1.5844.

Meanwhile, the dollar gained against the Japanese yen. The dollar bought ¥94.81, up from ¥94.42 late the previous day. The yen is often considered a safe haven in times of market uncertainty.

On Thursday, ratings agency Standard & Poor's affirmed the United Kingdom's top-tier credit rating, but lowered the country's outlook to "negative" from "stable."

S&P attributed the downward revision was to the possibility that the U.K.'s debt burden could reach 100% of its gross domestic product, despite the British government's "further fiscal tightening."

Given that the U.S. government has been spending at such a rapid pace, investors feared that a similar fate awaited the U.S.

"If the U.K. had the outlook for its credit rating cut from stable to negative, then the U.S. deserves to as well," said Kathy Lien, director of currency research at Global Forex Trading, in a research note.

WASHINGTON HAS A license to print money and a reputation for knowing very little about making profits, especially on sophisticated financial instruments such as stock warrants.

Yet the government is desperately in need of derivatives expertise, as the financial crisis has made it the owner of 10-year warrants on some 270 U.S. banks. Any bank that borrowed money under the Troubled Asset Relief Program (TARP) had to give Uncle Sam 10-year warrants equal to 15% of the loan. The warrants' strike prices were based on the 20-day trailing average price of the banks' shares. The warrants, which let the holder buy stocks at a certain price over a certain period, could ultimately be very valuable as banks recover from the credit crisis. In fact, many bank stocks already have jumped.

Among the big institutions receiving TARP money were Bank of America (BAC), Citigroup (C), JPMorgan (JPM), Morgan Stanley (MS), Wells Fargo (WFC) and Goldman Sachs (GS). We asked Credit Suisse derivatives strategists Edward K. Tom and Sveinn Palsson for help valuing those warrants, which of course aren't publicly traded and so have no obvious price. Doing this wasn't easy. To come up with their numbers, these analysts built a computer model that takes into account stock prices, the implied volatility