Euro steady after Portugal rating slashed

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TOKYO: The euro was steady against the dollar in Asian trade on Tuesday after sliding following a Moody's downgrade of Portugal to junk status, tempering optimism over progress on eurozone debt.

The euro fetched $1.4443 from $1.4418 late in New York on Tuesday, compared with levels above $1.45 Monday.

It was at 116.91 yen, down from 117.32 Tuesday.

Against the Japanese currency, the dollar bought 80.82 yen from 81.10 yen.

The single currency had fallen sharply overnight in the minutes after Moody's Investors Service slashed Portugal's credit rating by four notches to Ba2 from Baa1 and warned that it could be lowered further.

The ratings agency said its main concern was that Lisbon would require a second bailout, just as Greece now does, and that private sector creditor banks would have to take some of the pain.

It warned European banks could face losses if they agree to roll over their Greek debt to give the embattled nation more time to organise its finances, as is being proposed by European officials.

Ratings agency moves, including earlier warnings from Standard & Poor's that current plans for a second Greek bailout involve an effective default and a Moody's warning on local government debt in China, conspired to hit risk sensitive currencies such as the euro, dealers said.

"It's apparent there's still a lot of water to pass under the bridge in Europe and the water is murky at that," Christopher Gore, currency analyst at GoMarkets in Melbourne said.

After Greece passed tough austerity measures, eurozone finance ministers authorised the next 12 billion euros ($17 billion) tranche of last year's European Union-International Monetary Fund bailout over the weekend.

The move had eased concerns about a potential cascade of problems tearing through the eurozone and the wider global economy, but positive sentiment has since faded.

Attention was now shifting to the European Central Bank's rate-setting meeting Thursday and key US jobs data Friday.

"The lack of upside impetus in the euro reflects the fact that a hike by the (ECB) is fully priced in, and markets are wary of chasing the euro in case we see a similar 'buy the rumour, sell the fact' reaction which characterised last month's meeting," said Credit Agricole in a client note.

"There will not be a great shift in sentiment ahead the ECB meeting tomorrow and US non-farm payroll data release on Friday," Credit Agricole said. (AFP)