* Euro little changed, Asian buying lifts it from low
* Euro-zone debt worries cap euro gains, worry investors
* Dollar back below 81.00 yen
* Risk trade may face reversal as year winds down (Recasts, updates prices, adds comment, changes byline)
NEW YORK, Nov 9 (Reuters) - The euro erased losses against the dollar on Tuesday but stalled below $1.40, weighed down by worries about Irish and Portuguese government debt.
Heavy Asian and Middle Eastern buying helped lift the euro off a $1.3823 session low, trader said, but euro long positions established in recent months will cap gains in the short run, particularly with markets worried about euro-zone debt levels.
The euro was last at $1.3921 EUR=, little changed from late Monday in New York, but traders said a retreat to $1.3697 was possible after the euro's overnight slide pushed it beyond the 76.4 percent retracement of a recent rally that culminated last week just shy of $1.43, a 9-1/2-month high.
"The rebound into the $1.40s was probably a bit too rich for the euro. I don't see much point holding it above there," said Andrew Wilkinson, analyst at Interactive Brokers Group.
The euro hit its recent high after the U.S. Federal Reserve said it would buy $600 billion of Treasuries by mid-2011 to lower interest rates and reinvigorate a sluggish economy.
While that has pushed U.S. bond yields lower and dulled the appeal of dollar investments, Wilkinson said it may boost U.S. growth in 2011, leaving markets to focus on the budget problems in euro zone countries such as Ireland and Portugal.
"I don't think those fears are overblown," he said.
The cost of protecting government debt against default in Ireland, Portugal and Spain has risen substantially in the past week, although it eased a bit on Tuesday ahead of a Portuguese bond auction the following day. [ID:nLDE6A8169]
Irish debt came under pressure this week on fear the government won't be able to cut spending as much as planned next year, which could complicate efforts to sell fresh debt.
The European Central Bank responded last week by intervening in bond markets after a three-week layoff. [ID:nLDE6A71ZA]
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