The euro jumped briefly on Tuesday after Japan said it would buy euro bonds to boost confidence in the European Financial Stability Facility amid fears that Portugal may become the next euro zone member to seek a bailout.

Japanese Finance Minister Yoshihiko Noda said Tokyo would buy about 20 percent of bonds the euro zone plans to jointly issue later this month.

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 after Japan said it would buy the euro bonds using its existing forex reserves, not with new currency purchases.

The single currency stood around $1.2955 at 9:20 p.m. ET, off the day's low but little changed from late levels in New York.

We see a further escalation in the European debt crisis, and a substantially weaker euro, said Stephen Jen, managing director of macroeconomics and currencies at BlueGold Capital Management LLP in London, on Monday.

There is no silver bullet because the underlying problems are 'knotted'.

Tokyo's benchmark Nikkei index <.N225> slid 0.23 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> was off 0.14 percent. Shares in Hong Kong, Taiwan and New Zealand were slightly higher.

Gold was steady on Tuesday while anxiety about Portugal's debt lingered, 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 gained 20 cents to $1,374.60 an ounce.

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 climbed further 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)

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