* S&P's downgrades Portugal; traders watch EU summit
* Australian dollar hits 2011 high versus U.S. dollar
* US fourth-quarter GDP revised up
(Updates prices, adds quotes, changes byline, dateline,
previous LONDON)
By Wanfeng Zhou
NEW YORK, March 25 (Reuters) - The euro slipped against the
U.S. dollar on Friday and could remain under pressure in the
near term on concern about a worsening debt crisis in Portugal
following the collapse of the country's government.
Standard & Poor's downgraded Portugal's credit ratings and
warned it could cut them again. IFR Markets reported that
European clearing house LCH.Clearnet said Portugal's bonds will
not be eligible in repo clear basket from next Monday. For
details, see [] []
Standard & Poor's downgrade prompted "one of the first
major rejection of Portuguese assets," said Kathy Lien,
director of currency research at GFT in New York. "For most of
the week the market has treated Portugal as an isolated problem
that will not spread to other parts of Europe but this
sentiment is losing popularity very quickly."
The euro <EUR=EBS> was last down 0.3 percent at $1.4128,
having earlier hit a session low of $1.41133 on trading
platform EBS. Traders reported option barriers around $1.4250
and said the level will be strongly defended. Technical
analysts said a weekly close above $1.4200 would leave it well
positioned for a further rise.
Portuguese debt yields hit new highs on Friday. But the
pressure for now did not spread towards other markets,
signaling the contagion risk was seen low at the moment.
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.
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.
Data showing the U.S. economy grew more quickly than
previously estimated in the fourth quarter boosted optimism
about the recovery and further supported the greenback.
"GDP came in a little better than expected. While
relatively old news, it adds to the somewhat improved tone of
the dollar earlier this morning," said Omer Esiner, chief
market analyst at Commonwealth Foreign Exchange in Washington.
An increase in risk appetite and growing demand for
dollar-funded carry trades saw higher-yielding currencies
gain.
The higher-yielding Australian dollar hit a 2011 high of
$1.0255 <AUD=D4>, just shy of its 29-year peak of $1.0257.
Traders cited stops above $1.0260, with option expiries at
$1.0200. Traders said model funds were adding to long positions
in the currency as were real money accounts.
The dollar was up 0.2 percent at 81.14 yen <JPY=>, but any
rise is expected to be capped by reported offers at 81.30-45
yen, with resistance also coming from the 21-day moving average
at 81.39 yen. That was well above a record low of 76.25 yen hit
last week.
(Additional reporting by Jessica Mortimer in London)
