Euro weakens to 4-month low on Cypriot fallout

European Bonds

Yields on Spanish 10-year bonds rose 10 basis points to 4.96 percent, snapping three days of a declines, and those of Italy increase 10 basis points to 4.61 percent.

“We wish to stay in the euro zone but leaving the euro zone now is a valid point that has to be explored,” Nicholas Papadopoulos, chairman of the parliamentary finance committee, said in a Bloomberg television interview. “We are going to enter into a very deep recession, high unemployment with no prospect of growth and we need to examine if there are other ways to solve these hurdles.”

The euro sank 0.7 percent against the dollar last week and tumbled 1.5 percent versus the yen, the most since the five days ended Feb. 8, as Cyprus talks coincided with data signaling the trading bloc’s economy is worsening.

“What people are more worried about, which is really deterring people from going back into the euro zone in size, is the fact that a lot of trust has been broken,” Geoffrey Yu, a senior currency strategist at UBS AG in London, said in a telephone interview. “People are wary about the future of the euro at this point because of the precedents that have been established.”

Market Measure

The euro fell 1.1 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The yen dropped 2 percent, while the dollar rose 0.6 percent.

The yen rallied, erasing an earlier loss, as investors sought the currency as a haven. Kuroda said last week at his inaugural press conference as Japan’s central bank chief that he’ll do whatever it takes to achieve a 2 percent inflation target.

“We do expect fireworks from Kuroda come his first policy meeting” on April 3-4, said Callum Henderson, the head of currency research at Standard Chartered Plc in Singapore. One option for Kuroda would be to announce an earlier start to open- ended asset purchases originally set for 2014, which may help push the dollar to 102 yen in the second quarter, he said.

Bloomberg News

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