FOREX-Euro shaky on Portugal worries, may see further pullback

* Portugal's parliament says 'No' to austerity budget

* EU set to delay decision on euro zone bailout fund

* Euro may pull back further from recent 4-½ mth peak

* But ECB rate rise expectations likely to limit fall

* Yen trapped by wariness over intervention

By Masayuki Kitano

SINGAPORE, March 24 (Reuters) - The euro struggled on Thursday but could pull back further from a recent 4-½ month high on heightened worries that heavily indebted Portugal will require a bailout from the European Union.

The euro was knocked lower the previous day when Portuguese Prime Minister Jose Socrates resigned after Portugal's parliament rejected his government's latest austerity measures aimed at avoiding a bailout. [ID:nLDE72M00L]

News that European leaders are unlikely to take a decision on how to strengthen the euro zone's bailout fund until June, also weighed on the single currency. [ID:nLDE72M1E6]

Although the euro regained a bit of ground in early Asian trade on Thursday, market players said the single currency could see a further correction in the near-term and possibly test levels around $1.40.

"Over the past week or so, the euro had been bought persistently, rising from around $1.38 to above $1.42 with quite a bit of momentum," said Tsutomu Soma, senior manager for Okasan Securities' foreign securities department in Tokyo.

"I wouldn't be surprised if there was a bit more of a pullback," Soma said, adding that the euro could drop to about $1.40 in the near-term.

The euro edged up 0.1 percent to $1.4106 , having trimmed some losses after shedding 0.8 percent on Wednesday. The euro has retreated after its rise earlier this week stalled at $1.4249, its highest level since early November.

Soma at Okasan Securities added, however, that the euro seems unlikely to enter a protracted downtrend at this point.

Market expectations that the European Central Bank will raise interest rates soon are likely to lend support to the euro, Soma said. Investors are bracing for the possibility that the ECB may raise interest rates as early as April.

The euro's latest drop gave some reprieve to the dollar.

The dollar index, which measures the dollar's value against a basket of currencies, stood at 75.841 <.DXY> and clung to the gains it made on Wednesday, when it rose 0.6 percent.

Against the yen, the dollar held steady from late U.S. trade on Wednesday at 80.92 yen .

Market players are wary that Japan may intervene further to sell the yen if the dollar drops below 80 yen, and especially if such a move occurs in volatile trade as was the case last week, when the yen hit a post-World War Two record high of 76.25 to the dollar.

At the same time, traders say Japanese exporters are likely to sell the dollar on rallies, helping keep the yen stuck in range-trading against the dollar.

Sterling edged up 0.1 percent to $1.6265 , trimming a bit of losses after it fell on Wednesday after the British government cut its growth forecasts and said borrowing would fall more slowly than hoped.

Minutes from the last Bank of England review showed policymakers were less hwakish than some market watchers had expected, also contributing to the sterling's fall on Wednesday, when it shed 0.8 percent. [ID:nLDE72M0W6] (Editing by Kim Coghill)