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 vs. 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 vs. 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.
“There hasn’t been much movement in the euro as it was largely anticipated that the vote was going to fail,” said Greg Anderson, New York-based head of Group of 10 currency strategy at Citigroup Inc., said in a telephone interview. “The focus of the market over the last 24 hours has been on what’s plan B when the vote fails. The euro is on wobbly ground, but Europe was fortunate that coming into this crisis the market was pretty short of euros.”
The euro fell 0.6% to $1.2876 as of 2:43 p.m. in New York, touching the weakest since Nov. 22. The shared currency fell below its 200-day moving average at $1.2875. It dropped 0.4% to 1.2202 francs, set for a seven-day losing streak, the longest since December 2010.
Technical Levels
“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 0.2% to 95.04 per dollar and gained 0.8% to 122.37 vs. the euro.
New Zealand’s dollar fell for a second day vs. 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 0.4% to 82.36 U.S. cents.
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 1.2% to 9.2838 per dollar.
India’s rupee fell vs. 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% to 54.3750 per dollar.
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%.
