Euro rises as Cyprus seeks alternatives to EU bank bailout plan

Cyprus Update

Cyprus hasn’t reached any deal with Russian investors for the sale of Cyprus Popular Bank Plc, government spokesman Christos Stylianides said in a telephone interview in Nicosia today. A preliminary deal to sell the bank to Russian investors was reached, Kathimerini Cyprus reported earlier, without citing anyone.

“The market is looking for some kind of a resolution to this issue,” Fabian Eliasson, vice president of corporate foreign-exchange sales at Mizuho Financial Group Inc. in New York, said of the Russian-investor speculation on a Cypriot bank.

The ECB is likely to delay a decision on whether to continue to supply Cypriot banks with emergency funds as it awaits clarity on the nation’s bailout, two people familiar with the deliberations said. The ECB assumes that a bank holiday in Cyprus will be extended to the end of the week, the people said.

ECB View

“The ECB statement that they are going to provide more liquidity means there is some time for renegotiation for Cyprus, so that’s a positive,” said Lutz Karpowitz, a senior foreign- exchange strategist at Commerzbank AG in Frankfurt. “As long as there is still some room for further negotiations, the market is relatively relaxed. If there is more and more impression that there won’t be a solution, then there may be more weakness in the euro.”

The euro may weaken to $1.25, the lowest since August, if no solution for Cyprus is found, Karpowitz said.

Europe will find a resolution for Cyprus, said Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager.

“It’s not a really major economic issue,” Fink said in a Bloomberg Television interview in Hong Kong. “It’s a $10 billion issue. It does remind us of the frailty of Europe. It does remind us that the European fix will be multiple years.”

The euro has dropped 1.2% during the past month, the second-worst performer after Norway’s krone among 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen weakened 0.7% and the dollar strengthened 1.7%.

The pound reversed an earlier decline against the dollar after minutes of the Bank of England’s March 6-7 meeting showed a majority of policy makers said more bond purchases may erode their credibility.

The pound gained 0.1% to $1.5119 after weakening as much as 0.5%.

Bloomberg News

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