* Euro up vs dollar, traders cite Asian sovereign demand
* Dollar erases early gains, hurt by U.S. rate view
* Euro seen testing $1.50 if ECB takes hawkish rate stance
(Adds comments, details)
By Naomi Tajitsu and Anirban Nag
LONDON, May 4 (Reuters) - The euro rose against the dollar on Wednesday, edging closer to $1.50, with the U.S. currency under renewed pressure on expectations that U.S. interest rates will stay low in coming months.
The euro was up 0.3 percent at $1.4870, with demand from Asian sovereigns as well as European real money interest boosting the single currency. Traders cited talk of option barriers at $1.4950 and at $1.50 while large offers were said to be at $1.4930/35.
Market participants said the euro brushed off a widely expected announcement Portugal had secured a 78 billion euro bailout. Portugal is the third euro zone country to seek a bailout after Greece and Ireland.
Portugal sold three-month T-bills at higher yields on Wednesday, but that did little to ruffle euro bulls, traders said..
A push above $1.50 is imminent, many analysts say, although some expect investors will wait to see if the European Central Bank maintains its tightening stance at a policy meeting on Thursday before driving it through the psychological level.
"Euro/dollar is in consolidation mode ahead of the ECB meeting and the non-farm payrolls data on Friday," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.
"The trend is clearly on the upside for the euro as the interest rate differential story is the overwhelming driver. The currency market seems to have learnt to live with the struggles of the peripheral euro zone nations. The euro is a buy on dips." The ECB is expected to signal on Thursday it will raise rates in the coming months to tame inflation, even as higher rates make it even more difficult for weak euro zone countries -- including Portugal -- to service their debts.
Investors have focused on how such tightening will widen the euro's rate differential against many currencies as a reason to buy euros. In contrast, the U.S. Federal Reserve intends to run its quantitative easing programme until the end of June and policy normalisation is still some months away.
"There are still no big incentives to go significantly short euros; at the end of the day, the dollar will be sold again, and it's just a matter of time for a test of $1.50," said Roberto Mialich, currency strategist at Unicredit in Milan.
Traders said their order books were loaded with offers around $1.4880-1.4950, which would cap gains. They cited offers from a semi-official European name around $1.4870, adding that unless the euro fell past its Tuesday's low of around $1.4750, investors would not unwind their bullish bets on the euro.
DOLLAR GAINS FIZZLE
In the options market, implied volatilities in euro/dollar are holding a firmer tone ahead of Thursday's ECB rate decision and Friday's U.S. employment report.
One-month was trading around 11.25 percent versus 11.05 Tuesday, although risk-reversals remain biased for euro downside, with the one-month 25-delta at 1.05 in favour of euro puts, unchanged from Tuesday.
The dollar slipped 0.2 percent versus a currency basket to 73.000. It hit 72.722 at the start of the month, its weakest since mid-2008.
Some gauges of market positioning suggest speculators and hedge funds have hefty short dollar positions against emerging Asian currencies and others including the Australian dollar, leaving open the possibility of more position unwinding and a further rebound in the U.S. currency.
But the dollar has been unable to build on short-covering support seen in past days, and given signals from the Federal Reserve that rates would stay long for a prolonged period, investors are likely to look for fresh selling opportunities.
The high-yielding Aussie was flat at $1.0830, easing from a session high of $1.0877, but well supported by Asian sovereign demand, traders said.
The Aussie was picked up at dips, having suffered losses in the past few days after it and other commodity-based currencies took a hit from a drop in silver prices.
The dollar was up slightly at 81.02 yen. (Editing by Ruth Pitchford)