March 28 (Bloomberg) -- The euro traded 0.2 percent from a four-month low versus the dollar on concern that future European bailouts could include the kind of bank deposit levies imposed on Cyprus.
The 17-nation currency headed for its biggest weekly decline in seven with Italian political parties still deadlocked ahead of a deadline today for forming a government. The yen gained against most of its major peers before Bank of Japan Governor Haruhiko Kuroda appears before upper house lawmakers ahead of a policy meeting next week.
“There is concern what’s happened in Cyprus is setting a precedent for what could potentially happen to deposit holders in other parts of the zone,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “I suspect Italian politics could weigh on the euro.”
The euro was unchanged at $1.2780 as of 9:30 a.m. in Tokyo from yesterday, when it touched $1.2751, the lowest since Nov. 21. The shared currency was little changed at 120.69 yen, following a 0.6 percent drop yesterday. The yen traded at 94.42 per dollar from 94.46.
The euro has declined 1.6 percent against the greenback this week, the most since the five day’s ended Feb. 8, and 1.6 percent versus the yen. Japan’s currency is little changed against the dollar since March 22.
Financial markets will be closed tomorrow for a holiday in most of Europe, the U.S., and much of Asia.
Cyprus’s banks will open their doors to customers today for the first time in almost two weeks, with new rules curbing access to cash. They’ve been closed since March 16, when the European Union presented a plan to force losses on all depositors in exchange for a 10-billion euro bailout.
A subsequent agreement shuts Cyprus Popular Bank Pcl, the nation’s No. 2 lender, and imposes larger losses on uninsured depositors.
Moody’s Investors Service yesterday lowered the highest rating that can be assigned to a domestic debt issuer in Cyprus to Caa2, citing a growing risk that the country would exit the euro. The company said Cyprus’s Caa3 government bond rating and negative outlook remain unchanged.
In Japan, the BOJ’s Kuroda goes before the upper house of parliament today, six days before he leads his first policy meeting as central bank chief.
In lower house testimony on March 26, Kuroda pledged to buy more government bonds to help achieve a 2 percent annual inflation target in two years.
Expectations of additional policy easing have driven the yen down 17 percent in the past six months, the biggest decline among 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The euro has gained 2.1 percent. The U.S. dollar has risen 2.8 percent.
Figures from the Commerce Department today may show the U.S. economy expanded at a revised 0.5 percent annual pace in the fourth quarter, faster than the government’s previous estimate of 0.1 percent growth, according to the median forecast in a Bloomberg News survey.
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