The euro languished near a four-month low on Tuesday after a brief rally triggered by a Japanese plan to buy euro bonds, while Asian stocks drifted, fearful of Portugal becoming the next casualty of the euro zone's debt crisis.
All eyes were on whether Lisbon would be able to raise funds in the debt market on Wednesday, its first bond auction of the year, or if soaring borrowing costs will force it to turn to the IMF and European Union for help.
Japan offered a show of support for Europe's struggle with debt, saying it would tap its euro reserves to buy bonds this month for an Irish rescue plan, but the market doubted it would provide much relief.
I don't think these comments (by Japanese Finance Minister Yoshihiko Noda) change the backdrop for the euro at all, said Todd Elmer, currency strategist for Citi in Singapore.
Despite the fact that we're seeing this groundswell of international support, it doesn't really change or address the underlying problem and that's not going to change until the European authorities themselves come up with a more comprehensive solution to mitigate the fallout from the debt crisis.
Japan does not disclose the currency breakdown of its $1 trillion reserves and analysts think only a very small portion is in euro.
The euro rose as high as $1.2992 on trading platform EBS from around $1.2925 in early Asian trade, but quickly pared its gains to stand little changed on the day. At 0551 GMT, it was below its 200-day moving average at $1.2940, just above a four-month trough hit on Monday.
Tokyo's benchmark Nikkei index <.N225> slid 0.3 percent on worries about the euro zone and overnight weakness on Wall Street, after hitting an eight-month closing high on Friday. Tokyo markets were closed on Monday for a public holiday. The broader Topix index was slightly higher.
The MSCI index of Asia Pacific stocks ex-Japan <.MIAPJ0000PUS> inched up 0.2 percent, with Hong Kong's Hang Seng Index <.HSI> up almost 1 percent.
Gold rose on worries about Portugal's debt, maintaining bullion's appeal as a safety net. A softer dollar typically helps gold because it makes the metal more affordable for holders of the euro and other currencies.
Spot gold was up $1.35 at $1,375.80 an ounce at 0549 GMT. The focus for the metal was Portugal's Wednesday bond aution.
Portugal is widely seen by investors as next in line in the euro zone to need a bailout after Greece and Ireland, but the government has repeatedly denied that it will seek foreign financing.
The European Central Bank threw Lisbon a temporary lifeline on Monday by buying some of its bonds, traders said.
The Dow Jones industrial average <.DJI> lost 0.3 percent on Monday, while the Standard & Poor's 500 Index <.SPX> edged down 0.1 percent. The Nasdaq Composite Index <.IXIC> gained 0.2 percent. <.N>
U.S. crude prices were steady above $89 on Tuesday as a key Alaskan oil pipeline remained shut, cutting total crude output by nearly 12 percent in the world's largest oil user.
(Editing by Kim Coghill)