Euro gains against the dollar as Portugal battles debt

The euro made slight gains against the dollar and yen in the currency market this morning as Portugal prepare to hold a bond auction to boost their economy.

After reaching its lowest level since 15 September yesterday at $1.2969, the euro rose to $1.3020 as trade opened on Wednesday morning.

Against the pound, the euro was also up from Tuesday’s close of 0.8366 pence, at 0.8377 pence.

Investor interest in high yielding currencies was renewed as the Portuguese government announced plans to auction up to 500m euros (£418m) of bonds later today in an attempt to reduce their growing national debt.

Despite formulating a 2011 austerity budget last week, Portugal has continued to struggle to meet deficit reduction targets and was yesterday placed on credit watch by ratings agency Standard & Poor’s.

Standard & Poor’s criticised Lisbon or doing “little to boost labour flexibility and productivity” and advised that the country focus on “growth-enhancing reforms”.

It is hoped that today’s auction will help ease concerns over Portugal being next in line for an EU bail-out.

The Republic of Ireland received 86b euros from the European Union last week after a crisis in their banking system left the nation on the brink of bankruptcy.

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