Euro falls versus dollar in London

The euro fell from a five-month high versus the dollar on Tuesday, knocked by a Portugal ratings downgrade and a rise in Chinese interest rates, while sterling jumped after strong data boosted the chances of a UK rate hike. The Chinese hike, by 25 basis points, also dented higher-yielding currencies like the Australian dollar, which slipped to a session low against the greenback.
Moody's cut Portugal's sovereign debt rating by one notch, saying debt problems on the eurozone periphery may prevent the European Central Bank from raising rates three times this year, which the market is pricing in. Reports that Portugal's biggest banks threatened to stop buying its government's debt, instead urging the caretaker administration to seek a short-term loan, also put pressure on the single currency.
However the euro was expected to stay stuck in its recent range after Monday's rally to a five-month high stalled ahead of resistance around $1.4280. This coincides with November's high of $1.4283 and a trendline drawn from the July 2008 record high. Traders said a break to the topside would expose large option barriers at $1.4350 and $1.4400, expiring around the middle of April. They also highlighted a large option at $1.4100, expiring on Friday, which could influence price action.
The single currency continued to garner support from widespread expectations for a 25 basis point rate hike by the ECB on Thursday, with reported bids from $1.4140 seen limiting losses. The euro was down 0.3 percent at $1.4170, pulling back from a five-month high of $1.4269 hit on Monday on trading platform EBS. Further resistance was at $1.4374, the 76.4 percent retracement of the euro's slide from November 2009 to June 2010.
The high-yielding Australian dollar fell 0.6 percent, passing through reported bids at $1.0300 to trade down to $1.0288, taking it further from a 29-year high of $1.0422 hit Monday. The Aussie is typically the most sensitive to moves by China to tighten monetary policy, which may weigh on growth in Australia's key trading partner. Sterling was up 0.6 percent against the dollar at $1.6228.
The US dollar was up 0.2 percent against a basket of currencies at 76.025. The dollar rose 0.3 percent to 84.30 yen, edging closer to a six-month peak of 84.735 yen set on Friday. A 200-day moving average at around 83.55 is now seen acting as support.