FOREX-Euro shrugs off Portugal worries; Aussie shines

* Euro resilient despite S&P’s downgrade of Portugal

* Australian dlr hits 2011 high vs USD, 29-yr high in sight

* Dlr/yen steady, fear of intervention keeps pair in range

(Updates prices, changes byline, dateline from previous HONG
KONG/SINGAPORE)

By Jessica Mortimer

LONDON, March 25 (Reuters) – The euro shrugged off concerns
about a debt crisis in Portugal on Friday, supported by steady
buying by Asian central banks, while the Australian dollar
hovered just shy of a 29-year peak versus the U.S. dollar.

Support for the euro was seen around $1.4150, helping it
recover from losses after Standard & Poor’s downgraded
Portugal’s credit ratings and warned it could cut it again, with
analysts saying Portugal’s troubles had been priced in.
[ID:nL3E7EO3OJ]

The euro was also helped by a stronger than expected survey
of German business sentiment. [ID:nBAE003896]
Any gains were expected to be limited, however, keeping the
euro below a barrier at $1.4250, which traders said was being
strongly defended. But technical analysts said a weekly close
above $1.4200 would leave it well positioned for a further rise.

Analysts said there were also hopes for some positive
signals from a summit of EU leaders, which has been clouded by a
political crisis in Portugal, where the prime minister resigned
after parliament voted down his latest batch of austerity
measures.

“The risk of downgrades to Portugal had been well
highlighted in the market so the damage to the euro was
limited,” said Ian Stannard at BNP Paribas.

“There is a tradition of EU leaders coming up with something
and putting a positive spin on things, and the euro looks well
positioned to take advantage”.

The single currency has stayed supported by expectations the
European Central Bank will raise interest rates as early as
April, boosting its yield advantage over the dollar.

The euro (EUR=: Quote, Profile, Research) dipped 0.1 percent to $1.4158. The single
currency rebounded after sliding to around $1.4050 on Thursday.
Traders suspected Asian sovereign names had been buying the euro
around that level.

European leaders agreed on Thursday to increase their
financial rescue fund to the full 440 billion euros by June, but
avoided discussing Portugal, which is under growing pressure to
seek a bailout. [ID:nLDE72O009]

The euro could target a 4 1/2-month high of $1.4249 hit
earlier in the week, and beyond that $1.4283, a peak in early
November.

“The market is treating many of these (Portugal) downgrades
as rear-guard action which is already well discounted and the
dollar is under pressure broadly,” said Todd Elmer, currency
strategist at Citi in Singapore.

The higher-yielding Aussie rose to a 2011 high just pips
away from its multi-decade peak of $1.0257, with investors
responding to a recovery in global equities and improving risk
sentiment.

The Australian dollar (AUD=D4: Quote, Profile, Research) rose 0.2 percent to $1.0229,
having hit a high of $1.0252, just shy of its 29-year peak of
$1.0257 struck on Dec. 31.

Traders said model funds were adding to long positions in
the currency but cited large stop loss orders above $1.0260.

The dollar index, which measures the dollar’s value against
a currency basket, was up 0.2 percent at 75.836 (.DXY: Quote, Profile, Research), not far
above 75.340 hit earlier this week, its lowest since December
2009. Traders said any breach of 75 could open way for a further
fall.

“With U.S. equities rising on solid earnings, it looks as if
risk appetite is improving,” said a trader for a major Japanese
bank in Tokyo.

JAPAN SEEN DEFENDING 80 YEN

Markets have settled after Japanese equities plunged last
week on worries over the economic toll from Japan’s earthquake
and tsunami, while fears over a quake-crippled nuclear power
plant had spurred a bout of risk aversion.

Joint intervention by the Group of Seven industrialised
nations to sell the yen to contain its surge versus the dollar
and other currencies has stabilised the FX market.

The dollar held steady against the yen at 81.02 yen (JPY=: Quote, Profile, Research),
staying some ways above a record low of 76.25 yen hit last week.

Market participants see Japan defending the dollar around 80
yen through the fiscal year-end, while analysts say Tokyo will
step in to curb yen strength around that level beyond March if
any yen appreciation is accompanied by erratic market movements.

Fears of more action to stem yen gains have kept dollar/yen
trapped in a tight range for now. Dollar selling interest among
Japanese exporters ahead of the financial year-end was also
expected to temper gains in the U.S. currency.
(Additional reporting by Naomi Tajitsu in Hong Kong and
Masayuki Kitano in Singapore; Editing by Hugh Lawson)

FOREX-Euro shrugs off Portugal worries; Aussie shines