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LONDON, Jan 12 (Reuters) - The euro edged up on Wednesday on speculation that euro zone finance ministers may raise the lending capacity of the region's rescue fund, though gains were limited as investors braced for a Portuguese bond auction.

Portugal holds a 1.25 billion euro sale later on Wednesday of bonds maturing in 2014 and 2020. Markets are anxious to see if the country can obtain funding at a sustainable cost or if it will be forced to turn to the European Union and IMF for help.

Spain, also under pressure over debt servicing, will offer bonds on Thursday.

The euro enjoyed some respite after euro zone sources said finance ministers are likely next week to consider raising the effective lending capacity of the currency bloc's rescue fund as part of efforts to calm jittery markets. [ID:nLDE70A1RM]

This follows Japan's promise to support an upcoming euro zone bond sale and talk the European Central Bank had bought debt.

Analysts said while these factors, along with an interest rate differential that was slightly favourable to the euro over the dollar, were supporting the single currency, it would trade in a holding pattern in the run-up to the Lisbon auction.

"The risk is that demand will be lower than the market expects, which would result in a weaker euro," said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.

"But the high yields on Portuguese debt may attract some overseas investors, which would be positive for the euro."

Recent bond buying by the European Central Bank helped drive down the yield on Portugal's benchmark 10-year bond PT10YT=TWEB to below 7 percent on Wednesday from euro lifetime highs of 7.3 percent last week.