The euro fell to a four-month low versus the dollar as the Cyprus bailout plan added to concern about the safety of the region’s bond holdings and deposits.
The 17-nation currency pared losses as Dutch Finance Minister Jeroen Dijsselbloem said Cyprus is a specific case, contradicting a Reuters report that Dijsselbloem called the bailout a model for Europe. The bailout plan will see Cyprus Popular Bank Plc wound down, wiping out bondholders, and will impose losses on some depositors at Bank of Cyprus Plc. The yen erased losses before central bank Governor Haruhiko Kuroda speaks to lawmakers tomorrow.
“There’s a queue of concerns that remain for the single currency, even if we were to see any type of concern about Cyprus abate,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said in a telephone interview. “The region’s stuck in recession.”
The euro weakened 1 percent to $1.2858 as of 4:12 p.m. in New York, after touching the least since Nov. 22. Europe’s shared currency dropped 1.4 percent to 121.06 yen. Japan’s currency rallied 0.3 percent to 94.17 per dollar.
Won Gains
South Korea’s currency strengthened as the Cyprus agreement eased concern Europe’s debt crisis will escalate. The won rose 0.8 percent to 1,110.85 per dollar.
The shekel gained as much as 0.9 percent to the greenback after the Bank of Israel kept its benchmark interest rate unchanged for a third month, as policy makers focus more on climbing domestic home prices than on the pace of recovery in the global economy.
Israel’s currency rose 0.6 percent to 3.6323 to the dollar.
The Cyprus accord spares bank accounts below the insured limit of 100,000 euros ($128,550). It imposes losses that two European Union officials said would be no more than 40 percent on uninsured depositors at Bank of Cyprus, which will take over the viable assets of Cyprus Popular Bank.
The European Central Bank said it won’t stop the Cypriot central bank from providing the island’s banking sector with emergency funding.
“The issues in Europe are more ingrained and deeper than the rate is showing,” said Mark Noble, a senior foreign- exchange trader at Silicon Valley Bank in Santa Clara, California, in a telephone interview. “They are still not out of the woods economically, there’s baggage in the outer core of the euro group, so I think there is still more pain ahead.”