* Euro hits 1-year low $1.3143 - Reuters data
* Greece, Portugal downgrades highlight euro debt crisis
* Market awaits further developments on Greece
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 <EUR=> down to $1.3143, according to Reuters data, its weakest since April 2009. The dollar hit an 11-month high against a currency basket as Greece's debt problems sparked risk aversion, pushing European stocks lower.
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 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 long-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 euro.
"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.
ECB President Jean-Claude Trichet and IMF Managing Director Dominique Strauss-Kahn were scheduled to brief German parliamentary groups on the Greek rescue plan on Wednesday.
German Chancellor Angela Merkel was due to make a statement at 1445 GMT after meeting Strauss-Kahn. [ID:nBAT005350]
European Union President Herman Van Rompuy said on Wednesday that negotiations on Greece's debt were well on track, and there was no question of restructuring it. [ID:nTKX006780]
By 1008 GMT, the euro traded at $1.3189, up slightly 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: 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.
Analysts said the downgrade of Greece had increased concerns about whether it would be able to finance its debt day to day, and may also have serious consequences for European banks.
UBS currency strategist Geoffrey Yu said banks may become unwilling to lend to their peers for fear they may be overburdened with debt issued by Greece or Portugal.
"Although we are not yet at the extremes, current market developments closely mirror the genesis of the funding crisis two years ago," he said in a note.
The yen fell, giving back some ground after rallying broadly on Tuesday. The euro <EURJPY=R> rallied 1 percent to 123.79 yen <EURJPY=R>, while the Australian and New Zealand dollar each raced up around 1.5 percent.
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)