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Global mkts: Portugal debt auction looms

The euro rose against the dollar on Wednesday, along with Asian stocks, but caution towards the currency is likely to set in ahead of key bond sales by highly indebted eurozone members Portugal and Spain.

January 12, 2011 / 11:33 AM IST

The euro rose against the dollar on Wednesday, along with Asian stocks, but caution towards the currency is likely to set in ahead of key bond sales by highly indebted eurozone members Portugal and Spain.


Currency traders have their eyes on Portugal's first debt auction of the year later in the day, when it is due to tap bond investors for around 1.5 billion euros, while Spain is seeking up to 3 billion euros on Thursday.


Markets are keen to see if they will be able to fund themselves at a sustainable cost or be forced to turn to the European Union and IMF for financial aid.


But the common currency was still enjoying some reprieve after eurozone sources said the region's finance ministers were likely next week to consider the option of raising the effective lending capacity of the currency's bloc's rescue fund as part of efforts to calm jittery markets.


This followed Japan's promise to support an upcoming eurozone bond sale and talk that the European Central Bank bought debt to help stabilise markets.


The euro was trading around USD 1.3015 to the dollar. On Monday, the euro plumbed a four-month trough around USD 1.2871.


"The Portuguese (debt) auction will probably go quite well and that'll likely give the euro a bump up... temporarily," said Joseph Capurso, a strategist at Commonwealth Bank, late on Tuesday.


"The bottom line is they're going to be paying something like 7% on their 10-year debt and that's probably more than they can afford. There is a very high chance they'll have to seek some sort of assistance from European partners and that'll push the euro back down again."


Asian shares were higher on the back of gains on Wall Street and solid earnings reports with Tokyo's benchmark Nikkei index up 0.5% at an eight-month high. The MSCI index of Asia Pacific stocks ex-Japan was up 0.3%.


The Dow Jones industrial average rose 0.3% on Tuesday. The Standard & Poor's 500 Index added 0.4%. The Nasdaq Composite Index gained 0.3%.


Crude oil prices climbed above USD 91 a barrel as a key Alaskan pipeline remained shut and on colder weather, lifting shares of energy producers but limiting gains of transportation and consumer-related stocks.

Gold rose more than USD 5 to USD 1,385.36 an ounce, below its historical high of around USD 1,430 struck in December but still buoyed by high oil prices and the eurozone crisis, both of which help promote gold's image as a safe haven.

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