By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) — The dollar slipped against its European counterpart in Asian trading Wednesday, ahead of a closely-watched government debt auction in Portugal.
The Portuguese bond auction “will be a big test for the euro, as the Portuguese government continues to insist that it does not require assistance,” said Barclays Capital currency strategists David Forrester and Yuki Sakasai.
“Our economists estimate that government bond yields below 6% over the long term are required for a debt stabilizing scenario to emerge for Portugal,” they said in a note to clients Wednesday.
The euro (EURUSD 1.3027, +0.0058, +0.4472%) rose to $1.3007 from $1.2973 in late North American trading Tuesday. See real-time currency quotes and tools.
Analysts said Wednesday’s relatively small sale of government bonds could provide a near-term test of the market, but Portugal’s fate doesn’t necessarily hinge on the results. The debt agency plans to sell between €750 million ($970 million) and €1.25 billion of bonds maturing in October 2014 and June 2020. See preview of Portugal debt auction.
Results are expected around 10:30 a.m. Lisbon time, or 5:30 a.m. Eastern time.
The dollar index (DXY 80.53, -0.32, -0.40%) , which tracks the greenback against a basket of six major rivals, slipped to 80.611 from 80.82 late Tuesday.
Against the yen, the dollar (USDYEN 83.0400, -0.1800, -0.2163%) changed hands at ¥83.03, compared with ¥83.25 late Tuesday
The British pound (GBPUSD 1.5656, +0.0050, +0.3204%) rose to $1.5646 from $1.5602 late Tuesday.
The Australian dollar (AUDUSD 0.9916, +0.0046, +0.4661%) erased an earlier decline and was up 0.6% at 99.01 U.S. cents, even as the massive flooding in Queensland continued to grab headlines.
Economists at Bank of America Merrill Lynch sliced 0.3 percentage point off their 2011 gross domestic product forecast for Australia Wednesday, citing the flooding. They now expect GDP growth of 3.0% for the year, compared to a previous forecast of 3.3% Read related story on Australia flood impact.
