* Euro pulls back from 5-month high vs dlr hit on Monday
* Hurt by Portugal downgrade and threats to stop buying debt
* China hikes rates; dents AUD, EUR but reaction limited
* Sterling rallies as data adds to rate hike chances
(Adds graphic, detail, updates prices)
By Jessica Mortimer
LONDON, April 5 (Reuters) - The euro fell from a five-month
high versus the dollar on Tuesday, knocked by a Portugal ratings
downgrade and a rise in Chinese interest rates, while sterling
jumped after strong data boosted the chances of a UK rate hike.
The Chinese hike [], by 25 basis points, also
dented higher-yielding currencies like the Australian dollar,
which slipped to a session low against the greenback.
Moody's cut Portugal's sovereign debt rating by one notch
[], saying debt problems on the euro zone periphery
may prevent the European Central Bank from raising rates three
times this year, which the market is pricing in. <ECBWATCH>
Reports that Portugal's biggest banks threatened to stop
buying its government's debt, instead urging the caretaker
administration to seek a short-term loan, also put pressure on
the single currency.
However the euro was expected to stay stuck in its recent
range after Monday's rally to a five-month high stalled ahead of
resistance around $1.4280. This coincides with November's high
of $1.4283 and a trendline drawn from the July 2008 record high.
"The euro has stalled ahead of the $1.4280 level. It is
still in an uptrend though people are wary of taking the euro
higher ahead of the ECB meeting," said Adrian Schmidt, currency
strategist at Lloyds.
"I think it will break $1.4280 but we may need to see a
narrowing in peripheral yield spreads (over German Bunds) before
it makes much progress above there".
Traders said a break to the topside would expose large
option barriers at $1.4350 and $1.4400, expiring around the
middle of April. They also highlighted a large option at
$1.4100, expiring on Friday, which could influence price action.
The single currency continued to garner support from
widespread expectations for a 25 basis point rate hike by the
ECB on Thursday, with reported bids from $1.4140 seen limiting
losses.
The euro <EUR=> was down 0.3 percent at $1.4170 <EUR=>,
pulling back from a five-month high of $1.4269 hit on Monday on
trading platform EBS.
Further resistance was at $1.4374, the 76.4 percent
retracement of the euro's slide from November 2009 to June 2010.
"There is a lot of good news priced into the euro already
and (ECB President Jean-Claude) Trichet will have to support the
rate view to keep the positive momentum," said Niels
Christensen, currency strategist at Nordea in Copenhagen.
The high-yielding Australian dollar fell 0.6 percent,
passing through reported bids at $1.0300 to trade down to
$1.0288, taking it further from a 29-year high of $1.0422 hit
Monday.
The Aussie is typically the most sensitive to moves by China
to tighten monetary policy, which may weigh on growth in
Australia's key trading partner.
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For a graphic on Chinese interest rates click on
http://r.reuters.com/veh88r
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STERLING SHINES; FED MINS AHEAD
An unexpected leap in UK services sector activity to a
13-month high buoyed the pound, lifting it up to 1 percent
higher versus the euro as the market moved closer towards
pricing in a UK rate hike in June. [] <BOEWATCH>
"Sterling is the main mover after the PMI data was vastly
higher than expected and there may be a little more potential
for UK rate expectations to be pulled up further," Lloyds'
Schmidt said.
Sterling was up 0.6 percent against the dollar <GBP=D4> at
$1.6228.
Later on Tuesday, minutes of the Federal Reserve March 15
meeting will be scrutinised for hints on whether U.S.
policymakers may be edging towards a tighter stance. Some Fed
officials have struck a hawkish tone recently, although others
have remained dovish.
The U.S. dollar <.DXY> was up 0.2 percent against a basket
of currencies at 76.025.
The dollar rose 0.3 percent to 84.30 yen <JPY=>, edging
closer to a six-month peak of 84.735 yen set on Friday. A
200-day moving average at around 83.55 is now seen acting as
support.
(Additional reporting by Neal Armstrong, editing by Ron
Askew)
