* Dollar rallies broadly; euro falls to 10-month low
* Fitch Ratings cuts Portugal"s sovereign rating
* Dollar index hits highest since May 2009
* Swiss franc climbs to fresh record high against the euro
(Adds comments, details. Updates prices)
By Vivianne Rodrigues
NEW YORK, March 24 (Reuters) - The U.S. dollar ralliedbroadly, while the euro fell to 10-month lows on Wednesday,after a rating downgrade for Portugal added to worries overdebt levels and growth in some of euro zone"s smallercountries.
Fitch Ratings lowered Portugal"s sovereign credit rating toAA-minus from AA, with a negative outlook. For details, see[ID:nWLB0770]
An already weak euro fell to the day"s low of $1.3329, itslowest since early May 2009.
Traders said a raft of stop-losses had been hit near the$1.3440/30 area in Asia and later in Europe, contributing tothe declines.
In the United States, economic reports on new orders formanufactured goods and housing data were mixed [ID:nN2396707]and [ID:nN2396501].
But analysts said the lackluster figures would not preventinvestors from buying more dollars.
"Sovereign credit worries in Europe and Japan are leadingto some general risk aversion," said Michael Malpede, a marketanalyst at Easy Forex in Chicago.
Michael Woolfolk, a senior currency strategist at BNYMellon in New York also said the data was taking a back seat toto general, speculative U.S. dollar buying, after euro-dollartrades had a big technical breakdown overnight.
The downgrade of Portugal was a good excuse to keep sellingeuros, according to Woolfolk.
"This may be short-lived, but I think we could get to 1.30in euro-dollar by the end of the week," he said. "A move to1.25 would probably require a more negative fundamental storyon the euro zone and Greece in particular, but such a movecan"t be discounted completely."
In late morning trading in New York, the euro was down 1.1percent at $1.3343 EUR=. At current prices, it was thebiggest one-day move since Feb. 17.
Against the yen, the dollar was 1.5 percent higher at 91.73yen JPY=, after touching a session high of 91.96 yen.
The single currency got little help from a rise in theGerman Ifo institute"s business climate index, which climbed to98.1 from 95.2 in February, higher than forecasts for 95.8.[ID:nLDE62N0R4]
"The euro is independently weak, with a significantlybetter-than-expected reading on the German Ifo proving only atemporary distraction from the problems in the periphery," saidAdam Cole, global head of FX strategy at RBC Capital Markets.
The market will keep a close eye on an European Unionsummit on Thursday and Friday, after Germany signaled for thefirst time that it may accept European financial aid for Greeceas a last resort.
But Germany pegged its support to several conditions,including the need for the International Monetary Fund to makea "substantial contribution." [ID:nLDE62M130]
"Germany is absolutely right in not being bullied into aquick fix -- when it comes to government problems, whether inGreece, the United States or elsewhere. Quick fixes aredifficult to come by," Axel Merk, of Merk Mutual Funds, said ina note.
DOLLAR GAINS
Investors flocked to the perceived safety of the U.S.currency, pushing the dollar to its highest since May last yearagainst a basket of currencies. The dollar index, which tracksthe performance of the greenback versus six other majorcurrencies, was up 1.1 percent at 81.797 .DXY.
The greenback hit a two-week peak against the Swiss francat 1.0716 CHF=, according to Reuters data. And the eurotraded flat versus the Swiss franc at 1.4272 francs EURCHF=,after hitting a fresh record low at 1.4233, according toReuters data.
Swiss National Bank President Phillip Hildebrand said onTuesday the central bank would keep fighting excessive francappreciation. But traders expect it to shy away fromlarge-scale intervention as the economy recovers.[ID:nLDE62M0D9]
Higher risk currencies such as the Australian AUD= andNew Zealand dollars NZD= also fell 0.7 percent against theU.S. dollar.
(Additional reporting by Steven C. Johnson in New York andTamawa Desai in London)
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