Tokyo - The euro edged up against the dollar in Asia on Wednesday ahead of a Portuguese bond issue later in the day seen as a key test of one of the eurozone's weaker members, dealers said.
The European single currency fetched $1.2987 in Tokyo afternoon trade, up from $1.2974 in New York late on Tuesday. The euro edged down to ¥107.93 from ¥108.00.
The dollar fell slightly to ¥83.11 from ¥83.23.
"Those who are trading in the shortest terms bought back euros as they see there will be no more pessimistic news that would come out before the bond sale," said Tsunemasa Sakai, chief manager of forex sales at Mitsubishi UFJ Trust and banking Corp.
But he warned that market players remained cautious ahead of the sale.
"Caution against risks over Europe's sovereign debts or financial systems is still strong.... Even though there is an easing of concerns at the moment, it is a long way until we can say all bad news is out," he said.
Japanese backing for the eurozone - its finance minister on Tuesday committed Tokyo to buying European bonds issued to fund Ireland's bailout - provided support, but investors were looking ahead to Wednesday's bond sale.
Because many believe Portugal will need to be bailed out - as Greece and Ireland were last year by the European Union and the International Monetary Fund - Lisbon must show it can raise fresh funds at sustainable interest rates.
Spain and Italy are set to sell bonds on Thursday, upping the stakes in the eurozone debt crisis.
Wednesday's debt auction marks Portugal's first foray into the bond markets since Ireland was forced to seek a bailout in November, with the expected sale of €750m to €1.25bn worth of long-term debt.
The yield on Portugal's 10-year bonds Tuesday shot to a record 7.193%, an interest rate most analysts consider unsustainable, but later fell to 6.805% amid market rumours that the European Central Bank had made massive purchases to calm markets.
"We note that both Greece and Ireland needed a bailout soon after their 10-year yields shot above seven percent," said John Kyriakopoulos at National Australia Bank.
The greenback fell to $29.07 Taiwan dollars from $29.20, having earlier hit 29.056, its lowest since October 1997, weighed by heavy foreign inflows, with the local stock market rising, analysts said.
Against Asian units, the dollar fell to $1.2926 Singapore dollars from $ 1.2974 on Tuesday, to 43.97 Philippine pesos from 44.29, to 30.41 Thai baht from 30.63 and to 9 048.00 Indonesian rupiah from 9 090.00.