Forex - Euro extends gains vs. dollar

The euro extended gains against the dollar on Monday after Portugal’s Prime Minister Pedro Passos Coelho pledged to stick to the country’s bailout program, following a two-week political crisis.

EUR/USD hit 1.3192 during European afternoon trade, the pair’s highest since July 11; the pair subsequently consolidated at 1.3169, gaining 0.24%.

The pair was likely to find support at 1.3088, Friday’s low and resistance at 1.3205, the high of July 11.

The euro was boosted as the yield on Portuguese 10-year bonds fell to 6.4% from 6.92% at the close of trade on Friday, after political leaders resolved a deadlock that had threatened to derail the country's EUR78 billion bailout program.

Demand for the dollar continued to be supported by expectations that the Federal Reserve will start to unwind its bond purchase program later this year.

Over the weekend, the Group of 20 nations stressed the need for a “careful” shift away from monetary easing so that market volatility does not negatively impact on the global recovery.

Finance ministers and central bankers from the G20 nations said Saturday that future changes to monetary policy should be “carefully calibrated and clearly communicated." 

The euro was lower against the pound and the yen, with EUR/GBP down 0.20% to 0.8587 and EUR/JPY falling 0.41% to 131.64.

The yen was broadly higher following Sunday’s elections in Japan’s upper house, which gave Japanese Prime Minister Shinzo Abe’s ruling coalition a majority in both houses of parliament.

The majority will allow Prime Minister Abe to continue to push through a series of structural reforms aimed at spurring economic growth and fighting deflation.