Credit rating agency Moody's cut Portugal's sovereign debt by one notch on Tuesday, saying it believed an incoming government would need to seek financing support from the European Union as a matter of urgency.
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Moody's cut its rating on Portugal's long-term government bonds to BAA1 from A3 and said the country's debt was still under negative review, with further downgrades dependent on Lisbon's ability to secure medium-term funding.
"...Moody's believes that the government's current cost of funding is nearing a level that is unsustainable, even in the short-term," the ratings agency said on a statement.
The euro [EUR=X 1.418 
-0.0037 (-0.26%) 
]eased to session lows of around $1.4172 after the downgrade.
Financial markets are convinced Lisbon will have to follow Greece and Ireland in asking the European Union and International Monetary Fund for a bailout.
However, caretaker Portuguese Prime Minister Jose Socrates, who resigned last month after parliament rejected his latest spending cuts, has made it a point of honour not to accept EU/IMF help. Read more
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