Asian stocks were off to a weak start while the euro remained fragile on Wednesday morning after Moody's slashed Portugal's credit rating to junk status and as investors take a breather after the past week's rally in risky assets.

Investors are cautious ahead of Friday's U.S. payroll data and the Chinese inflation numbers expected to be out next week.

Spot gold hovered near a 1- week high as Moody's latest move reignited fears about other highly indebted peripheral euro zone countries, just as worries about Greece eased a little after it secured a new tranche of emergency loans from international lenders.

While the market has moved on from Greece a little, there is still significant concern out there that it's not close to the end game, said Greg Gibbs, strategist at RBS in Sydney.

The euro fell to a low around 1.2093 Swiss francs, from above 1.2200, after Moody's cut Portugal's credit rating by four notches to Ba2, saying there is great risk the country will need a second round of official financing before it can return to capital markets.

Against the dollar, the common currency dropped about a full cent to a low around $1.4395, before recovering a bit of ground to $1.4428.

MSCI's Asia Pacific index excluding Japan <.MIAPJ0000PUS> fell 0.1 percent slipping further from Monday's one-month high with healthcare and information technology leading early losses.

Japan's Nikkei <.N225> was trading mildly higher as it struggled to breach the 10,000 level although gains in commodity stocks helped drive the benchmark higher for a seventh day.

The Chinese banking sector is likely to come under pressure, keeping the Shanghai and Hong Kong markets on the back foot after Singapore state investor Temasek launched a $3.7 billion sale in two Chinese state-owned banks, Bank of China <3988.HK> and China Construction Bank <0939.HK>.

The Temasek move comes a day after ratings agency Moody's warned that its credit outlook on Chinese banks may turn negative as China's local government debt may be understated by as much 3.5 trillion yuan ($540 billion).

Portugal China Japan