By: Barbara Zigah

The Euro appears to be approaching a key test level as news that the Greek government is close to clinching a deal with its private bondholders helped to boost the common currency. The U.S. Dollar meanwhile continues to soften after last week’s Federal Reserve announcement which committed the central bank to an extended period of ultra low interest rates. The U.S. Dollar Index, used to gauge the greenback’s relative strength against other major currencies, fell to 78.883 .DXY, a decline of 0.4%.

As reported at 12:50 p.m. (JST) in Tokyo, the Euro was trading against the U.S. dollar at $1.3187, a gain of 0.3% and edging closer to the 6-week high struck last week on the EBS trading platform. One forex strategist said that the near term direction for the Euro will be dependent upon its breach of the $1.3244 level which would then provide the common currency with some short covering support.

The Euro saw some pressure during yesterday’s trading session on news that bond yields for Portugal soared to a Euro-era record high; 10-year benchmark sovereign bonds closed at 16.58%, up from Friday’s yield of 14.645% and well off Spain’s 10-year sovereign bonds which recently returned a 4.98% yield for similarly-dated debt.