* Euro rises, broad selling momentum cools for now
* Yield spreads between Portgual, Spain tighten vs Germany
* Investors await Portuguese T-bill auction
(Adds comment, updates throughout; previous TOKYO)
By Naomi Tajitsu
LONDON, Dec 1 (Reuters) - The euro rose on Wednesday as a three-day selling spree lost steam, but doubts about whether the euro zone can contain debt problems facing some members kept the single currency in range of a 2 1/2-month low versus the dollar.
A slight narrowing of yield premium of government debt in Portugal, Spain and Italy over safe-haven German bonds, also supported the euro but market participants said the single currency remained vulnerable to more selling.
Investors awaited an auction of 12-month Portuguese Treasury bills on Wednesday, and analysts said the euro could be stung by weak results, whether a lack of demand or a jump in the premium Lisbon must pay to borrow.
"Spreads in Portugal, Italy and Spain are a bit narrower, and that's leading to the correction in the euro," said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
But he added that investors were still speculating that other countries may follow Ireland and Greece in asking for bailouts, and any suggestions of this would drag the euro lower.
"If the (auction results) disappoint, they would immediately put the debt crisis back into focus, and be used to sell the euro versus the dollar."
Portugal is widely seen as being next in line for a bailout. Ratings agency S&P on Tuesday put its A-minus rating on review for possible downgrade, citing uncertainties stemming from the risk Lisbon may need financial aid.
"You really need some aggressive action from the authorities in Europe to try and calm nerves and that's really the key at this stage," said Greg Gibbs, a strategist at RBS in Sydney.
By 0852 GMT, the euro had climbed 0.7 percent on the day to the day's high of $1.3091.
Last month, the euro fell from a high of $1.4281 to around $1.3446 when speculation grew that Ireland may require a bailout. A short-lived correction took the single currency to $1.3785, before opening the way to more selling.
Some in the market said a fall equivalent to that seen in early November would take the euro down to $1.2950, adding that that level may provide short-term support. Others in the market suspected options at that level were due to expire on Friday.
The rise in the euro lifted other currencies also considered to be higher risk, including the Australian dollar. The Aussie rose 0.6 percent to $0.9630, recovering earlier losses versus the U.S. currency suffered on weak economic growth data.
At the same time, the safe-haven Swiss franc fell to 1.0060 francs per dollar, its weakest since late September.
The dollar was flat on the day at 83.70 yen.
The dollar slipped 0.3 percent versus a currency basket to 80.926, but stayed near a 2 1/2-month high hit on Tuesday as the U.S. currency, the most liquid and therefore considered safe, has benefited from the euro's problems, which has fuelled a retrenchment in investor confidence.
Euro zone debt problems are also raising the cost of accessing dollar cash for companies and banks.
While dollar interest rates such as three-month LIBOR have risen only slightly in the past few days, euro/dollar basis swap spreads have risen sharply in recent weeks in a possible sign that some euro zone banks are trying to raise dollar cash through swaps.
The one-year spread of more than 50 basis points is above the peak it hit in the wake of the Greek debt crisis in May, though still far below the peaks after the Lehman Brothers collapse in 2008.
(Additional reporting by Tokyo treasury team)