Renewed uncertainty in the euro zone may have put the euro under pressure in recent days, but analysts argue that it's the European Central Bank (ECB) meeting, rather than the developments in Portugal, that pose a bigger risk to the single currency.
Analysts say expectations that the ECB's policy statement on Thursday will sound dovish, with President Mario Draghi keeping monetary easing on the table, should lead to further weakness in the euro.
"Today's ECB policy announcement is a much larger threat to the euro," BNP Paribas said in a note. "The ECB statement could see an increased emphasis on forward guidance, while also highlighting an implicit contrast between the Fed's QE (quantitative easing) tapering signal and the ECB's accommodative stance for the foreseeable future."
(Read More: Draghi Walks on Ice as Portugal Fears Intensify)
The central bank's dovish message should lead to "decreased front-end yield support for the euro," BNP Paribas said, adding that they are maintaining a short euro trade with a target of $1.2640, which is a nearly 3 percent fall from current levels of around $1.30.
Nick Verdi, director, FX strategy Asia Pacific ex-Japan at Barclays backed that sentiment saying he is in the short euro-U.S. dollar camp right now given that ECB president Draghi would be less confident now than he was in past meetings.
"I think that Draghi two meetings ago was actually fairly confident about the cyclical recovery in the euro area albeit from very low levels - but I think he'll be much more nervous now given the back up in yields that we seen in the periphery, so that should lead the euro to be weaker," Verdi said.