FOREX-Euro falls versus US dollar on Portugal worry

* S&P's downgrades Portugal; traders watch EU summit

* Australian dollar hits 2011 high versus U.S. dollar

* US fourth-quarter GDP revised up

(Updates prices, adds quotes, changes byline, dateline, previous LONDON)

By Wanfeng Zhou

NEW YORK, March 25 (Reuters) - The euro slipped against the U.S. dollar on Friday and could remain under pressure in the near term on concern about a worsening debt crisis in Portugal following the collapse of the country's government.

Standard & Poor's downgraded Portugal's credit ratings and warned it could cut them again. IFR Markets reported that European clearing house LCH.Clearnet said Portugal's bonds will not be eligible in repo clear basket from next Monday. For details, see [ID:nL3E7EO3OJ] [ID:nIFR7yFMR4]

Standard & Poor's downgrade prompted "one of the first major rejection of Portuguese assets," said Kathy Lien, director of currency research at GFT in New York. "For most of the week the market has treated Portugal as an isolated problem that will not spread to other parts of Europe but this sentiment is losing popularity very quickly."

The euro was last down 0.3 percent at $1.4128, having earlier hit a session low of $1.41133 on trading platform EBS. Traders reported option barriers around $1.4250 and said the level will be strongly defended. Technical analysts said a weekly close above $1.4200 would leave it well positioned for a further rise.

Portuguese debt yields hit new highs on Friday. But the pressure for now did not spread towards other markets, signaling the contagion risk was seen low at the moment.

European leaders agreed on Thursday to increase their financial rescue fund to the full 440 billion euros by June, but avoided discussing Portugal, which is under growing pressure to seek a bailout.

The single currency has stayed supported by expectations the European Central Bank will raise interest rates as early as April, boosting its yield advantage over the dollar.

Data showing the U.S. economy grew more quickly than previously estimated in the fourth quarter boosted optimism about the recovery and further supported the greenback.

"GDP came in a little better than expected. While relatively old news, it adds to the somewhat improved tone of the dollar earlier this morning," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

An increase in risk appetite and growing demand for dollar-funded carry trades saw higher-yielding currencies gain.

The higher-yielding Australian dollar hit a 2011 high of $1.0255 , just shy of its 29-year peak of $1.0257. Traders cited stops above $1.0260, with option expiries at $1.0200. Traders said model funds were adding to long positions in the currency as were real money accounts.

The dollar was up 0.2 percent at 81.14 yen , but any rise is expected to be capped by reported offers at 81.30-45 yen, with resistance also coming from the 21-day moving average at 81.39 yen. That was well above a record low of 76.25 yen hit last week. (Additional reporting by Jessica Mortimer in London)