* Euro off recent peaks before ECB rate decision
* Portugal's aid request unlikely to change ECB rate hike view
* Yen faces long-term slide but correction risks imminent
By Natsuko Waki
TOKYO, April 7 (Reuters) - The euro held below the previous day's 11-month high against the yen and 14-month peak versus the dollar as investors focused on how much room the European Central Bank has for raising interest rates beyond a widely expected tightening later in the day.
The yen remained near a six-month trough against the dollar. The Bank of Japan is expected to keep monetary policy on hold but signal its readiness to ease policy further, bucking a global trend of central banks withdrawing excess liquidity put in place during the financial crisis.
More tightening signals anticipated from the European Central Bank helped to offset concerns about euro zone debt after a Portuguese request for European financial aid, but many believe the single currency is overdue for a correction after a recent rally.
"The market ignored Portugal's request for aid because it was seen unlikely to stop the ECB from raising interest rates. But the key is how much they are going to raise going forward," said Teppei Ino, an analyst at bank of Tokyo-Mitsubishi UFJ.
The euro was down 0.1 percent at $1.4310 , having risen to $1.4350, its highest since late January 2010, on Wednesday.
The break of $1.4282 has seen the euro progress towards a major 76.4 percent retracement at $1.4375 but a failure to rise strongly beyond there could open the way for a move back to around $1.4160. Near-term support is seen in the $1.4285-1.4250 area.
The dollar stood at 85.34 yen , having risen as high as 85.54, almost 10 yen above its record low of 76.25 yen hit in March, days after northeast Japan's devastating earthquake.
Resistance around the November high of 85.94 yen is hindering the dollar's further advance. The area around 85.40 to 85.95 includes a 50 percent retracement of the decline from the May peak, as well as a downtrend line from the 2007 cycle high.
The euro rose as high as 122.55 yen , just ticks away from the previous day's 11-month peak.
The yield spread between two-year euro zone and Japanese government bonds rose to 164.6 basis points, its highest since December 2008.
The yen is expected to face long-term downward pressure from low interest rates and an expected decline in Japan's trade surplus as the country imports to rebuild the quake-hit region.
EURO AND ECB
The ECB is set to raise its benchmark rate by 25 basis points for the first time since July 2008. Many analysts say ECB President Jean-Claude Trichet must sound hawkish enough to keep alive expectations for around 100 basis points in rate hikes expected by November and for the euro to achieve fresh gains.
Another concern for the euro is the region's persistent debt crisis. Portugal became the third euro zone member to seek a bailout from the European Union, with the size of the package expected to be around 60 billion to 80 billion euros ($85-114 billion).[ID:nLDE7350HL]
Higher euro zone interest rates would likely make it difficult for debt-laden peripheral countries to finance their deficits, by raising already high borrowing costs.
On the other hand, higher oil prices are expected to support the euro as resource-rich countries convert part of their dollar revenues into the single currency for diversification.
Brent crude oil prices rose to a 2-1/2 year high above $123
a barrel on Wednesday
In Asia, where central banks are stepping up intervention, euro demand from authorities which are also diversifying their reserves is likely to offer the single currency a solid floor.
The expectation for higher euro zone rates contrasted with uncertainty in the United States over when the Federal Reserve may begin to tighten policy. The U.S. economy remains too fragile for the Fed to begin raising rates, Atlanta Fed President Dennis Lockhart said on Wednesday [ID:nN06207079].
The dollar was up 0.1 percent at 75.613 against a basket of currencies.
The Australian dollar scaled a fresh 29-year peak against the dollar of $1.0481 and rose to 89.45 yen , its highest since September 2008, after data showed the economy added a higher-than-expected 37,800 jobs in March. [ID:nSYU010876] ($1 = 0.703 Euros) (Additional reporting by Masayuki Kitano and Reuters FX analyst Krishna Kumar; Editing by Edmund Klamann)