FOREX-Euro falls broadly on Portugal downgrade

* Euro at session low vs dlr (EUR=: ) on Portugal downgrade

* Peripheral euro zone debt worries up, Greek auction due

* Good euro bids seen ahead of $1.2500

(Releads, updates throughout; previous TOKYO)

By Neal Armstrong

LONDON, July 13 (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) broadly on Tuesday
after ratings agency Moody’s downgraded Portugal, exacerbating
concerns over peripheral euro zone debt ahead of a Greek T-Bill
auction.

Moody’s cut Portugal’s debt rating by two notches to A1 with
a stable outlook, saying the government’s financial strength was
likely to weaken over the near-term. [ID:nWLA8184]

“The downgrade is going to weigh on the euro in the short
term and doesn’t bode well ahead of the bank stress tests due
next week,” said David Tinsley, economist at NAB Capital.

The single currency fell around 40 ticks against the dollar
to the day’s low of $1.2523 (EUR=: ) and hit a session low against
the pound at 83.51 pence (EURGBP=D4: ).

Traders said range players were buyers around the lows, the
same accounts then looking to sell around $1.2640. Asian buyers
were also reported in the $1.2500 region, while real-money
accounts were layering bids from $1.2490.

Debt-laden Greece returns to capital markets for the first
time since late April, seeking to raise 1.25 billion euros
through a sale of six-month Treasury bills. Results are expected
between 0930 and 1000 GMT.

“There is short-term event risk for the euro this morning
with the Greek T-Bill auction. The euro could come under
short-term pressure if they are forced to pay a high yield,”
said Paul Mackel, director of currency strategy at HSBC.

Key resistance for the euro was seen around $1.2687, the
trendline from the December high.

“While capped by $1.2687, our stance will be negative,”
Commerzbank technical analysts said in a note to clients.

A robust response to a Spanish debt auction earlier this
month saw the euro rally to two-month highs. That coincided with
worries the United States was heading towards a double-dip
recession, sending the greenback to its lowest in nearly two
months against a basket of currencies.

Those concerns have taken a back seat, but traders said real
money investors and margin traders were still cautious, given
lingering worries about a global slowdown.

DOLLAR INDEX

The dollar index (Read more about the global trade. ) was up 0.3 percent at 84.487 (.DXY: ) while
the U.S. currency was also a touch firmer against the yen at
88.57 yen (JPY=: ).

“Dollar/yen continues to be suppressed by the options market
and 87.80 to 89.10 has us contained for now,” said a spot trader
at a U.S. bank in London.

The yen struggled for most of the previous session, after
Japan’s ruling Democratic Party suffered a stinging defeat in a
weekend parliamentary election, but recouped its losses during
North American trade.

Higher-yielding currencies such as the Australian and New
Zealand dollars initially benefited after Alcoa (AA.N: ) posted a
higher-than-expected profit for the second quarter on Monday.
[ID:nN12206110]

But those currencies later gave back gains as Shanghai
shares (.SSEC: ) fell more than 1 percent, somewhat cooling risk
appetite.

Shanghai shares fell more than 2 percent at one point after
the government said it would continue to rein in speculation in
the country’s red-hot property sector. [ID:nTST000264]

Other Dow heavyweights reporting earnings this week include
Intel Corp (INTC.O: ), JPMorgan Chase (JPM.N: ) and General Electric
(GE.N: ).

(Additional reporting by Rika Otsuka, editing by Nigel
Stephenson)

FOREX-Euro falls broadly on Portugal downgrade