* Euro hits 1-year low $1.3143 - Reuters data
* Greece, Portugal downgrades highlight euro debt crisis
* Market awaits further developments on Greece
(Adds detail, updates prices)
By Naomi Tajitsu
LONDON, April 28 (Reuters) - The euro hit a one-year low against the dollar on Wednesday as investors fretted the euro zone debt crisis could spread after Tuesday's downgrades of Greece and Portugal's credit ratings.
Traders slapped the euro
The euro was stung by a surge in Greek government bond yields -- driving their spreads over German benchmarks to new records -- a day after ratings agency Standard & Poor's cut Greek debt to junk level and downgraded Portugal. [ID:nLDE63P0LU]
Market participants sought clarity on the extent of aid Greece may receive, and whether it would be enough to offer a longer-term fix to Athens's debt problems.
Analysts said Portugal's downgrade reflected wider credit risks in the euro zone, which could create cracks in the euro system and further batter the single currency.
"The euro is going to remain under pressure given a lack of clarity on the euro zone outlook -- whether there will be more contagion to other euro zone economies, and what concrete structural reforms are going to take place in Greece," said Phyllis Papadavid, currency strategist at Societe Generale.
Reuters on Wednesday obtained a draft of a German law currently begin drawn up which showed Berlin, the euro zone's biggest funding country, plans provisions for Greek loans not only for this year, but also 2011 and 2012. [ID:nBAT005351
At the same time, the European Commission said the amount of possible emergency loans to Greece from the euro zone next year has not been discussed, and that any solution for Athens would be ad hoc, applying only to that country. [ID:nBFA001160
ECB President Jean-Claude Trichet and IMF Managing Director Dominique Strauss-Kahn were scheduled to brief German parliamentary groups on the Greek rescue plan at around 1230 GMT on Wednesday.
German Chancellor Angela Merkel was due to make a statement at 1445 GMT after meeting Strauss-Kahn. [ID:nBAT005350]
By 1114 GMT, the euro traded at $1.3195, up 0.3 percent on the day. Some in the market said traders were squaring short euro positions after it tumbled more than 1.5 percent on Tuesday, clocking its biggest one-day percentage loss in a year.
But sentiment remained negative on the currency, helped in part by a slide in European stocks <.FTEU3> to a seven-week low.
The euro has fallen below long-term support levels in recent months, including $1.3405, a 61.8 percent Fibonacci retracement of its rally from its 2008 trough to its 2009 peak.
This points to the possibility of further declines. A 76.4 percent retracement lies at about $1.2990. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^For euro retracement graphic: http://link.reuters.com/qyb79j ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The dollar index <.DXY>, which tracks the dollar's performance against a basket of currencies, rose to 82.560, its highest since May 2009.
The yen fell, giving back some ground after rallying broadly
on Tuesday. The euro
Market participants cited demand to sell the yen related with expected launches of Japanese Toshin retail fund issues, along with general demand to shed positions in the Japanese currency ahead of Japan's Golden Week holidays next week.
Tokyo markets will also be closed for a holiday on Thursday.
The Federal Reserve is widely expected to keep U.S. interest rates on hold near zero after a two-day policy meeting that ends on Wednesday, and stick to its commitment to keep them there for an "extended period". [ID:nN27160583]
(Graphic by Scott Barber, additional reporting by Jessica Mortimer, editing by Nigel Stephenson, John Stonestreet)