* Euro slides, dragged lower by losses vs rallying sterling
* Dollar hits one-month high vs yen above 82 yen
* Euro also weighed down by Portuguese bond auction
(Updates prices, adds quotes)
By Jessica Mortimer
LONDON, Nov 10 (Reuters) - The euro lost ground against the
dollar on Wednesday, dragged lower by losses versus sterling,
which fell after a Bank of England inflation report made further
monetary easing in the UK look less likely.
The dollar was broadly firmer, rallying to a one-month high
versus the yen, supported by higher U.S. bond yields.
"The dollar has some support from higher bond yields and
that is most clearly obvious in dollar/yen," said Jane Foley,
currency strategist at Rabobank.
"In euro/dollar we are seeing what is coming out in the wash
from moves elsewhere, with clear moves in sterling and
dollar/yen, while the peripheral euro zone story is still a
negative for the euro."
Traders said an auction of Portuguese government bonds, at
which borrowing costs rose compared with a previous auction,
weighed on the euro. []
The dollar sailed higher versus the yen -- which is
particularly sensitive to movements in the difference between
U.S. and Japanese bond yields -- after stop-loss orders were
triggered, pushing the U.S. currency above 82.00 yen.
The euro <EUR=> was down 0.2 percent at $1.3754, edging
closer to the day's low around $1.3732 hit in earlier trade.
Support was seen at that level, last touched in late October.
Foley said the euro was likely to stay in a range versus the
dollar, which would stay vulnerable to selling pressure after
the U.S. Federal Reserve's decision last week to restart
quantitative easing.
The euro's losses and gains in dollar/yen helped prod the
dollar higher versus a currency basket <.DXY>. It climbed 0.7
percent to around 82.37 yen <JPY=>.
The dollar gained after longer-dated U.S. Treasury bond
yields jumped on Tuesday, with the market watching for an
auction of 30-year debt later on Wednesday.
STERLING GAINS
The euro hit a six-week low versus sterling <EURGBP=D4>
after the BoE said near-term inflation would pick up further.
Investors took that as a sign that more UK quantitative easing
may be unlikely for now. []
Although the BoE forecast consumer price inflation would be
around 1.6 percent in two years, lower than its 2 percent
target, it said there was a wider than usual range of views over
the risks to growth and inflation among its policymakers.
"The euro move is being driven by euro/sterling selling
following the slightly hawkish BoE inflation report," a currency
trader in London said.
Sterling <GBP=D4> climbed 0.6 percent on the day to $1.6079.
The euro has retreated from a 9 1/2-month high touched last
week versus the dollar as concerns have resurfaced about debt
problems facing euro zone members Ireland and Portugal, seen as
possible candidates for a Greek-style bail-out.
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Graphic on Ireland's bailout challenge
http://r.reuters.com/wuv48p
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But the euro's pace of losses has slowed somewhat as some
investors speculate that more QE by the Fed will weigh on the
U.S. currency. The European Central Bank meanwhile, is sticking
to its monetary policy.
"Despite the correction we've been seeing, the euro's bull
trend is still in place," said John Hydeskov, senior currency
analyst at Danske Bank in Copenhagen.
The gap between benchmark Irish and German bond yields
expanded to a euro lifetime high. []
Borrowing costs in Ireland have reached record highs this
week as Dublin plans to push through hefty spending cuts and tax
hikes in an effort to convince investors it is not on the verge
of financial meltdown. []
