Euro Falls to 3-Month Low as Cyprus Rejects Bank Levy
The euro fell to a three-month low against the dollar as Cyprus’s parliament voted down an unprecedented bank-deposit levy, fueling speculation the nation’s bailout will falter.
The dollar strengthened versus most of its 16 major counterparts as the Federal Reserve began a two-day meeting projected to maintain its monetary stimulus. The yen erased losses and rallied versus all of its 16 most-traded person haven demand. The 17-nation currency is set for its longest run of declines against the Swiss franc in more than two years.
“We like buying dollars in this environment,” David Simmonds, London-based head of currency and emerging-markets strategy at Royal Bank of Scotland Plc, said in an interview at Bloomberg’s New York office. “Euro dollar is going lower from here. Selling euro-dollar may require some patience.”
The euro fell 0.6 percent to $1.2882 as of 5:00 p.m. in New York, after touching the weakest level since Nov. 22. The shared currency fell below its 200-day moving average at $1.2875. It dropped 0.5 percent to 1.2197 francs, closing lower for a seventh day in the longest losing streak since December 2010.
“The uncertainty regarding the vote is helping the market try to challenge a very key support at $1.2872, $1.2874 and $1.2876 which are absolutely key levels for euro-dollar.” Sebastien Galy, a foreign-exchange strategist in New York at Societe Generale SA, said in a telephone interview.
The yen added 0.1 percent to 95.16 per dollar and gained 0.8 percent to 122.59 versus the euro.
New Zealand’s dollar fell for a second day versus the U.S. currency as Finance Minister Bill English said in an interview that there may be a “correction in valuation” as the U.S. economy recovers. The so-called kiwi declined 0.3 percent to 82.46 U.S. cents in New York.
The South African rand declined against most major counterparts, extending the worst slide among emerging-market currencies this year, on concern forced power blackouts by Eskom Holdings SOC Ltd. may hamper output. The currency slipped 0.8 percent to 9.2458 per dollar.
India’s rupee fell versus the majority of its main peers after the central bank cut interest rates for the second time this year to bolster the weakest economic growth in a decade. It depreciated 0.4 percent to 54.3750 per dollar.
Cypriot President Nicos Anastasiades failed to secure support in parliament for the law imposing losses on depositors, a key demand of European officials in return for funds to prevent a financial collapse. Euro-area finance ministers said this week the island nation must raise 5.8 billion euros ($7.5 billion) as a condition for a bailout, even as they signaled flexibility in applying the levy to small-scale savers.
Cyprus’s Defense Minister Fotis Fotiou said the government was working on a “Plan B” if the vote didn’t pass. Efforts are under way on alternatives “to try and get something better for Cypriots,” he told Greek Skai Television.
“The focus of the market over the last 24 hours has been on what’s plan B when the vote fails,” said Greg Anderson, New York-based head of Group of 10 currency strategy at Citigroup Inc., said in a telephone interview. “The euro is on wobbly ground, but Europe was fortunate that coming into this crisis the market was pretty short of euros.”
The yen gained strengthened for a fourth day versus the dollar, the longest streak since September.
“Yen still has that relative safe-haven appeal,” said Eric Viloria, a senior currency strategist at Gain Capital Group LLC in New York. “We still have a bearish outlook on the yen. We would look at this yen strength as an opportunity.”
Japan’s currency fell earlier today as BOJ Governor Masaaki Shirakawa steps down, making way for Haruhiko Kuroda who has pledged to do whatever it takes to counter deflation. In his final press briefing, Shirakawa said that merely expanding the monetary base won’t be enough to end deflation and it’s dangerous for central banks to try to control market movements.
“We are going to have a new Bank of Japan (8301) governor soon and the market’s perception of him is that he will be dovish,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “That’s likely to weigh on the yen.”
The yen has weakened 16.9 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, after Prime Minister Shinzo Abe pledged to end deflation. The dollar gained 3.3 percent and the euro appreciated 2.5 percent.
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