Euro falls to 3-month low as Cyprus lawmakers reject bank levy

Cyprus Vote

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 notion of a failed vote knocked the wind out of the euro,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “The clock is really ticking on them. The banks are closed, and the economy can’t function if people can’t get their money.”

The yen gained strengthened for a fourth day vs. the dollar, the longest streak since September.

‘Bearish Outlook’

“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 steped 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 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 16.1% 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 3.7% and the euro appreciated 2%.

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