* Euro/dollar hovers near 6 1/2-month low hit in Asia
* Greece, Portugal debt concerns mount
* Dollar supported after FOMC meet, rate rise seen this year
(Adds details, quote, updates throughout)
By Neal Armstrong
LONDON, Jan 28 (Reuters) - The euro slipped on Thursday,
hovering near a 6 1/2-month low against the dollar as investors
remained wary on concerns over heavily indebted smaller euro
zone countries such as Greece and Portugal.
The dollar gained support after Kansas City Fed President
Thomas Hoenig dissented from a U.S. Federal Reserve pledge, in a
statement after a policy meeting, to keep interest rates low
"for an extended period".
This bolstered the view that rates may start to rise later
this year. []
Greek government bond yields have shot up on concerns over
how Athens will pay its debts. As a result, the 10-year
Greek/German Bund spread blew out on Thursday to its widest
since Greece joined the euro in 2001.
The cost of insuring its sovereign debt against default also
hit a record high.[]
The spread later narrowed slightly after French newspaper Le
Monde reported that euro zone states were studying ways to help
Greece resolve its budget problems. []
Jeremy Stretch, currency strategist at Rabobank in London,
said the wide spread was keeping the euro under pressure, while
other analysts warned more losses may follow as concerns rise
about the grim fiscal conditions in the euro zone.
"The market remains positioned for further euro weakness
ahead and risk appetite in general is at a fairly low level."
Debt worries are not confined to Greece.
Ratings agency S&P said concerns over Portugal's public
finances had not abated after this week's budget.
[]
By 1247 GMT, the euro <EUR=> traded flat at $1.4020.
Earlier, it fell to $1.3930, its weakest since mid-July. Large
options expiring at $1.4000 on Friday were widely reported.
Technical traders said the euro hit its low after breaking
under its 55-week moving average at $1.3980, before a rise in
share prices prompted a turnaround. Traders were watching for a
weekly close under $1.3980 to open up fresh downside potential.
The euro <EURJPY=R> rose 0.2 percent against the yen to
126.30 yen, but stayed near Wednesday's nine-month low of 125.17
yen.
The dollar was flat against a currency basket <.DXY> after
hitting a 5 1/2-month high of 79.066 in early trade. It held
above its 200-day moving average at 78.32 following its decisive
break above that level on Tuesday.
BERNANKE VOTE AWAITED
The high-yielding Australian and New Zealand dollars rose
after U.S. President Barack Obama announced no new measures to
punish the financial sector, sparking recovery in risk appetite.
In his State of the Union address on Wednesday, Obama
focused on job creation rather than any concrete details of
banking reforms []
Increased demand for risk pushed the Australian and New
Zealand dollars each roughly 1 percent higher on the day against
their U.S. counterpart.
Analysts said some investors bought back higher-risk
currencies such as the Aussie and kiwi, which were sold last
week when Obama's pledge to crack down on U.S. banks'
risk-taking triggered risk aversion.
The New Zealand currency rose even as the Reserve Bank of
New Zealand kept interest rates on hold as expected on Wednesday
and reaffirmed it saw no need to raise before mid-year.
The dollar rose 0.3 percent to 90.30 yen as the Japanese
currency also stumbled on demand for riskier assets.
Investors awaited a U.S. Senate vote on U.S. Federal Reserve
Chairman Ben Bernanke's nomination for a second term later in
the day. []
(Additional reporting by Naomi Tajitsu; Editing by Nigel
Stephenson)
