AFP - The euro topped 1.32 dollars on Tuesday, after China expressed support for EU measures to tackle the eurozone debt crisis, but pared gains as Moody's warned over a possible ratings downgrade for Portugal.
The European single currency climbed as high as 1.3202 in early trade, before pulling back to 1.3154 dollars. That compared with 1.3126 dollars late in New York on Monday.
"The euro was at the heart of the action, with two events defining its price action," said currency strategist Elsa Lignos at RBC Capital Markets in London.
"Early in Asia, newswires reported Chinese Vice Premier Wang Qishan pledging concrete action to help the EU with its debt problems, boosting euro/dollar."
She added: "In fact, Wang said China 'has taken concrete action' -- it was not a future promise and not entirely new. Nevertheless, the official statement of support is positive for the euro and Europe.
"London came in and bought up more euro, pushing euro/dollar as far as 1.3202, which explains the sharp reaction to news that Moody's was putting Portugal on review for downgrade.
"The announcement was in line with other agencies' actions and as such, not a huge surprise, but it wrong-footed the market."
Wang Qishan said Tuesday that China supports the measures taken by the EU and the International Monetary Fund to aid financial stability in the eurozone, according to the Dow Jones Newswires.
Last week, EU leaders pledged to defend debt-plagued eurozone nations with a permanent bailout mechanism from mid-2013 -- the successor to a temporary, IMF-backed trillion-dollar facility.
Greece and Ireland have both been bailed out by the EU and the IMF. Portugal, Spain, Belgium and even Italy are considered at risk by experts going into 2011.
In a fresh development, Moody's warned on Tuesday it may lower by one or two notches Portugal's A1 rating owing to uncertainty about growth and borrowing prospects, but said it expected Lisbon to be able to pay its debts.
"In Moody's opinion, Portugal's solvency is not in question," Anthony Thomas, Moody's Vice President and lead analyst for Portugal was quoted as saying in a statement.
"But the likely deterioration in debt affordability over the medium term and ongoing concerns about the economy's ability to withstand fiscal consolidation and private sector deleveraging mean its outlook may no longer be consistent with an A1 rating."
In London on Tuesday, the euro changed hands at 1.3154 dollars against 1.3126 dollars late in New York on Monday, at 110.17 yen (109.95), 0.8489 pounds (0.8461) and 1.2630 Swiss francs (1.2662).
The dollar stood at 83.75 yen (83.78) and 0.9601 Swiss francs (0.9644).
The pound was at 1.5494 dollars (1.5506).
On the London Bullion Market, the price of gold rose to 1,387.38 dollars an ounce from 1,380 dollars late on Monday.
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