(Corrects to make clear in first paragraph that sterling rose after BoE report)
* Euro slides, dragged lower by losses vs rallying sterling
* Dollar hits one-month high vs yen above 82 yen
* Euro also weighed down by Portuguese bond auction
(Updates prices, adds quotes)
By Jessica Mortimer
LONDON, Nov 10 (Reuters) - The euro lost ground against the dollar on Wednesday, dragged lower by losses versus sterling, which rose after a Bank of England inflation report made further monetary easing in the UK look less likely.
The dollar was broadly firmer, rallying to a one-month high versus the yen, supported by higher U.S. bond yields.
"The dollar has some support from higher bond yields and that is most clearly obvious in dollar/yen," said Jane Foley, currency strategist at Rabobank.
"In euro/dollar we are seeing what is coming out in the wash from moves elsewhere, with clear moves in sterling and dollar/yen, while the peripheral euro zone story is still a negative for the euro."
Traders said an auction of Portuguese government bonds, at which borrowing costs rose compared with a previous auction, weighed on the euro. [ID:nLIS002504]
The dollar sailed higher versus the yen -- which is particularly sensitive to movements in the difference between U.S. and Japanese bond yields -- after stop-loss orders were triggered, pushing the U.S. currency above 82.00 yen.
The euro
Foley said the euro was likely to stay in a range versus the dollar, which would stay vulnerable to selling pressure after the U.S. Federal Reserve's decision last week to restart quantitative easing.
The euro's losses and gains in dollar/yen helped prod the
dollar higher versus a currency basket <.DXY>. It climbed 0.7
percent to around 82.37 yen
The dollar gained after longer-dated U.S. Treasury bond yields jumped on Tuesday, with the market watching for an auction of 30-year debt later on Wednesday.
STERLING GAINS
The euro hit a six-week low versus sterling
Although the BoE forecast consumer price inflation would be around 1.6 percent in two years, lower than its 2 percent target, it said there was a wider than usual range of views over the risks to growth and inflation among its policymakers.
"The euro move is being driven by euro/sterling selling following the slightly hawkish BoE inflation report," a currency trader in London said.
Sterling
The euro has retreated from a 9 1/2-month high touched last
week versus the dollar as concerns have resurfaced about debt
problems facing euro zone members Ireland and Portugal, seen as
possible candidates for a Greek-style bail-out.
Graphic on Ireland's bailout challenge
http://r.reuters.com/wuv48p
But the euro's pace of losses has slowed somewhat as some investors speculate that more QE by the Fed will weigh on the U.S. currency. The European Central Bank meanwhile, is sticking to its monetary policy. "Despite the correction we've been seeing, the euro's bull trend is still in place," said John Hydeskov, senior currency analyst at Danske Bank in Copenhagen.
The gap between benchmark Irish and German bond yields expanded to a euro lifetime high. [GVD/EUR]
Borrowing costs in Ireland have reached record highs this week as Dublin plans to push through hefty spending cuts and tax hikes in an effort to convince investors it is not on the verge of financial meltdown. [ID:nLDE6A3168]