The euro is sinking to a 13-month low below $1.29 after credit ratings agency Moody's Investor Services said it may downgrade Portugal's debt.
Standard & Poor's last week downgraded Portugal's credit rating, sending borrowing costs soaring.
Moody's move underscores fears that a euro110 billion bailout for Greece, now worth about $142 billion, may not be enough to halt the debt crisis in Europe.
The euro sank as low as $1.2883 in morning trading in New York, its lowest point since April 2009. The euro was worth $1.3004 in late New York trading Tuesday.
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