FOREX-Euro tumbles on Greece, Portugal downgrades

* Euro slips as S&P cuts Greece, Portugal’s credit rating

* Market awaits details on Greek aid

* Yen gains broadly on risk aversion

* US consumer confidence rises more than expected

(Adds detail, quote, updates prices)

NEW YORK, April 27 (BestGrowthStock) – The euro slid broadly on
Tuesday as downgrades of Greece and Portugal’s credit ratings
added to worries aid for Greece could be blocked to raise fears
the euro zone’s debt problems were spreading.

Standard & Poor’s downgraded Greek ratings into junk
territory on doubts about its ability to implement reforms
needed to address its high debt burden. For details, see
[ID:nWNA9645]

The agency also downgraded Portugal’s ratings earlier on
Tuesday, citing concerns about its ability to deal with high
debt levels given its weak economic outlook. [ID:nWNA9638]

“There is such a fear of contagion in the euro zone between
the downgrades of Portugal and Greece,” said Carol Hurley,
senior market strategist at Lind-Waldock in Chicago. “There is
a lack of resolution on Greece and how aid will go to Greece
and how it will affect other countries.”

The heightened risk aversion that hurt the euro, boosted
the dollar and the yen. European shares fell as investors
worried political pressures could stall financial aid Athens is
seeking from the European Union and International Monetary Fund
to help pay its debts. [ID:nLDE63P0LU]

Markets were focused on risks the Greek debt crisis will
extend to other highly indebted states such as Spain.

THE GORILLA IN THE ROOM

The spread between Greek and German government bond yields
swelled to its widest in 12 years as investors demanded higher
premiums to hold Greek debt. The yields on short-term German
government bonds fell to new euro-lifetime low (EU2YT=RR: ).

In early afternoon trading in New York, the euro was 1.1
percent lower at $1.3253 (EUR=: ) according to Reuters data. The
single currency traded as low as $1.3212 earlier after hitting
a one-year low around $1.32 on Friday.

Hurley said the next significant support on the euro was
the psychological level of $1.30 at which point many investors
may be inclined to sell. After that the next support is around
1.2880, the low from April, 2009.

Against a currency basket (.DXY: ), the dollar rose 0.6
percent to 81.961, but the dollar slipped 0.7 percent to 93.30
yen (JPY=: ) after going to a session low of 92.82 yen.

The cost of insuring Greek debt hit a record high as did
that of Portugal, reflecting wider euro zone credit risk which
some analysts said could potentially create cracks in the euro
system.

“Markets are really concerned about sovereign debt issues
in Europe,” said Brian Dolan, chief currency strategist at
Forex.com, in Bedminster, New Jersey. “Greek (credit default
swaps) spreads are hitting Argentine levels today.”

German Chancellor Angela Merkel’s party said on Tuesday it
would bring up the subject of haircuts on Greek debt with the
European Central Bank and the IMF on Wednesday. [ID:nLDE63Q18W]

Berlin also has demanded Athens take painful austerity
measures in return for aid. [ID:nLDE63P0LU]

Greece formally asked for aid on Friday and talks between
the government, the European Union and International Monetary
Fund were under way in Athens.

Athens needs to secure funding before a May 19 debt
rollover deadline.

“There’s just a feeling that even with all these
downgrades, we’re still playing catch-up and there’s still more
to bad news to come,” said Win Thin, a currency strategist at
Brown Brothers Harriman in New York. “People know Greece and
Portugal are issues, but the gorilla in the room is still
Spain.”

Against the yen, the single European currency fell to as
low as 122.67 yen (EURJPY=: ) down 2.2 percent on the day.
General risk aversion often benefits the low-yielding Japanese
currency.

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FOREX-Euro tumbles on Greece, Portugal downgrades