LONDON/TOKYO -- The euro hit a one-week dollar low on Tuesday after international ratings agency Moody's cut Portugal's sovereign debt rating, stoking fresh market concerns over the eurozone debt crisis.
At about 0725 GMT, the European single currency sank as low as 1.2533 dollars. It later recovered some ground to 1.2545 dollars, down from 1.2594 dollars in New York late Monday.
Against the Japanese currency, the dollar weakened to 88.36 yen from 88.62 yen on Monday.
In trading in London on Tuesday, the euro was at 1.2545 dollars against 1.2594 dollars on Monday, at 110.85 yen (111.63), 0.8323 pounds (0.8380) and 1.3329 Swiss francs (1.3354).
The dollar stood at 88.36 yen (88.62) and 1.0626 Swiss francs (1.0597).
The pound was at 1.5072 dollars (1.5026).
The dollar was mixed against other Asian currencies, firming to 1.3825 Singaporean dollars from 1.3806 Monday, to 46.30 Philippine pesos from 46.22 and to 32.15 Taiwanese dollars from 32.04. The greenback fell to 9,040.00 Indonesian rupiah from 9,047.50, while staying flat at 32.35 Thai baht.
Moody's said Tuesday that it cut Portugal's debt rating by two notches to A1 from the previous AA2, citing the nation's worsening public finances and weak growth prospects.
The ratings agency said it expected Portuguese government trends to continue to deteriorate for “at least another two to three years,” with the ratio of total debt to Gross Domestic Product eventually nearing 90 percent — way over the European Union limit of 60 percent.
“The waters remain disturbed concerning the sovereign debt crisis and the move by Moody's to cut Portugal's rating to A1 has triggered some selling of the euro this morning,” City Index analyst Joshua Raymond told AFP.
“Moody's said that Portuguese growth is likely to remain weak unless structural reforms bear fruit.”
The euro was also dampened on Tuesday by downbeat data in eurozone powerhouse Germany.
German investor confidence plunged for the second month running in July as investors saw limited potential for further improvement in the economy, the ZEW economic research institute said.
ZEW's closely watched but volatile financial sector index fell to 21.2 points from 28.7 points in June, a statement said.
The July reading was well below analyst forecasts for 26 points compiled by Dow Jones Newswires and the lowest level since April 2009 although the ZEW institute noted that other readings on the economy were positive.
