* Euro slips as S&P cuts Greece, Portugal’s credit rating
* Market awaits details on Greek aid
* Yen gains broadly on risk aversion
* US consumer confidence rises more than expected
(Adds detail, quote, updates prices)
NEW YORK, April 27 (Reuters) - The euro slid broadly on Tuesday as downgrades of Greece and Portugal’s credit ratings added to worries aid for Greece could be blocked to raise fears the euro zone’s debt problems were spreading.
Standard & Poor’s downgraded Greek ratings into junk territory on doubts about its ability to implement reforms needed to address its high debt burden. For details, see [ID:nWNA9645]
The agency also downgraded Portugal’s ratings earlier on Tuesday, citing concerns about its ability to deal with high debt levels given its weak economic outlook. [ID:nWNA9638]
“There is such a fear of contagion in the euro zone between the downgrades of Portugal and Greece,” said Carol Hurley, senior market strategist at Lind-Waldock in Chicago. “There is a lack of resolution on Greece and how aid will go to Greece and how it will affect other countries.”
The heightened risk aversion that hurt the euro, boosted the dollar and the yen. European shares fell as investors worried political pressures could stall financial aid Athens is seeking from the European Union and International Monetary Fund to help pay its debts. [ID:nLDE63P0LU]
Markets were focused on risks the Greek debt crisis will extend to other highly indebted states such as Spain.
THE GORILLA IN THE ROOM
The spread between Greek and German government bond yields swelled to its widest in 12 years as investors demanded higher premiums to hold Greek debt. The yields on short-term German government bonds fell to new euro-lifetime low EU2YT=RR.
In early afternoon trading in New York, the euro was 1.1 percent lower at $1.3253 EUR= according to Reuters data. The single currency traded as low as $1.3212 earlier after hitting a one-year low around $1.32 on Friday.
Hurley said the next significant support on the euro was the psychological level of $1.30 at which point many investors may be inclined to sell. After that the next support is around 1.2880, the low from April, 2009.
The cost of insuring Greek debt hit a record high as did that of Portugal, reflecting wider euro zone credit risk which some analysts said could potentially create cracks in the euro system.
“Markets are really concerned about sovereign debt issues in Europe,” said Brian Dolan, chief currency strategist at Forex.com, in Bedminster, New Jersey. “Greek (credit default swaps) spreads are hitting Argentine levels today.”
German Chancellor Angela Merkel’s party said on Tuesday it would bring up the subject of haircuts on Greek debt with the European Central Bank and the IMF on Wednesday. [ID:nLDE63Q18W]
Berlin also has demanded Athens take painful austerity measures in return for aid. [ID:nLDE63P0LU]
Greece formally asked for aid on Friday and talks between the government, the European Union and International Monetary Fund were under way in Athens.
Athens needs to secure funding before a May 19 debt rollover deadline.
“There’s just a feeling that even with all these downgrades, we’re still playing catch-up and there’s still more to bad news to come,” said Win Thin, a currency strategist at Brown Brothers Harriman in New York. “People know Greece and Portugal are issues, but the gorilla in the room is still Spain.”
Against the yen, the single European currency fell to as low as 122.67 yen EURJPY= down 2.2 percent on the day. General risk aversion often benefits the low-yielding Japanese currency.