The dollar rose against the euro Tuesday after Portugal's credit rating was downgraded.
Rating agency Standard & Poor's downgraded Portugal's credit worthiness, saying that the country's outlook is "Negative."
Investors may view the downgrade _ the second one in a week _ as a sign that a bailout is possible, said Brian Kim, senior currency strategist for UBS AG in Stamford, Conn. Fitch, another rating agency, downgraded the debt-ridden country on Thursday.
If Portugal is forced to seek financial aid it would become the third European country to do so, following Greece and Ireland. Such a move would be the latest sign for investors that Europe's debt problems might not be easily resolved.
Standard & Poor's also downgraded Greece's credit rating Tuesday, saying it was "highly likely" the country would need to take out more bailout loans.
The euro fell to $1.4088 late Tuesday from $1.4097 late Monday.
The dollar strengthened despite weak economic reports from the U.S. that showed declining consumer confidence and falling home prices.
Worries about rising food and gas prices pushed the Conference Board's Consumer Confidence Index down to 63.4 from 72.0 in February. The decline was deeper than expected.
Standard & Poor's/Case-Shiller index showed that home prices dropped in 19 cities from December to January. Eleven of them are at their lowest level since the housing bust, in 2006 and 2007.
In other trading late Tuesday, the British pound fell slightly to $1.5990 from $1.6000. The U.S. dollar rose to 0.9219 Swiss franc Tuesday from 0.9170 Swiss franc late Monday, and it fell to 97.51 Canadian cents from 97.61 Canadian cents.
The dollar rose to 82.43 Japanese yen Tuesday from 81.65 yen late Monday. Authorities in Japan are still struggling to contain radiation from a nuclear power plant that was crippled an earthquake and tsunami almost three weeks ago.