Euro Rises Slowly on Portugal Bond Sale
Wednesday, 12 January 2011

The euro rose weakly against the dollar on Wednesday while Asian stocks edged higher, but investors were increasingly nervous ahead of a key bond sale by ailing euro zone member Portugal later in the day.

Eyes are on Lisbon's first debt auction of the year, when it is due to tap bond investors for around 1.5 billion euros, while Spain is seeking up to 3 billion euros on Thursday.

Markets are keen to see if they will be able to fund themselves at a sustainable cost or be forced to turn to the European Union and IMF for financial aid.

But the common currency still enjoyed some reprieve after euro zone sources said the region's finance ministers were likely next week to consider the option of raising the effective lending capacity of the currency bloc's rescue fund as part of efforts to calm jittery markets.

This followed Japan's promise to support an upcoming euro zone bond sale and talk that the European Central Bank bought debt to help stabilize markets.

The euro was trading around $1.2986 to the dollar. On Monday, the euro plumbed a four-month trough around $1.2871.

"The Portuguese (debt) auction will probably go quite well and that'll likely give the euro a bump up ... temporarily," said Joseph Capurso, a strategist at Commonwealth Bank, late on Tuesday.

"The bottom line is they're going to be paying something like 7 percent on their 10-year debt and that's probably more than they can afford. There is a very high chance they'll have to seek some sort of assistance from European partners and that'll push the euro back down again."