* Euro still smarts from "Cyprus model" suspicions
* Little sign of contagion to Italy, Spain
* Yen under pressure ahead of April 3-4 BOJ meeting
* Commodity currencies shine on rising risk appetite after
Wall St gains
By Hideyuki Sano
TOKYO, March 27 The euro hovered near a
four-month low against the dollar on Wednesday after a rescue
deal for Cyprus raised fears about financial stability in the
currency bloc, while the yen dipped on hopes of more bond buying
by the Bank of Japan.
Commodity currencies held firm after upbeat data on U.S.
home prices helped to lift U.S. shares, with the Dow Jones
Industrial Average hitting a new record and the S&P 500 coming
within striking distance of its all-time closing high.
The euro traded flat at $1.2855 in early Asian trade,
not far from four-month low of $1.2828 hit on Tuesday. Against a
resurgent Australian dollar, it traded near the four-month low
of A$1.2225 hit on Tuesday, fetching A$1.2274.
The common currency is still suffering from suspicions that
bank depositors and bond holders may be forced to foot the bill
in future rescue deals in the currency bloc following the
Jeroen Dijsselbloem, head of the Eurogroup of finance
ministers, raised the idea on Monday, saying that the rescue
plan for Cyprus will serve as a model for resolving future euro
-zone banking crises, but later appeared to backtrack saying
Cyprus was a unique case, but the damage was already done.
"The euro still has downside risks. You never know what's
coming up next," said a trader at a European bank.
"But some hedge funds are now covering short positions in
the euro and I think the currency may stabilise for now," he
The euro could stabilise for the Easter holidays. Some
analysts also noted there is little sign of dreaded contagion to
the euro zone's larger economies, such as Spain and Italy.
Their debt yields were well within recent ranges, thanks in
part to the European Central Bank's bond buying scheme.
The euro also gained about 0.2 percent against the yen to
121.68 yen, as the Japanese currency fell on fresh
expectations for major Bank of Japan's stimulus.
Japanese business daily Nikkei reported on Wednesday that
the Bank of Japan will decide to expand its bond buying on
April 3-4, the first policy review meeting under new Governor
The dollar also rose 0.2 percent to 94.53 yen,
extending its rebound from one-week low of 93.53 yen.
Commodity currencies also held firm, helped by positive risk
U.S. home prices posted their biggest year-on-year gain in
six and a half years in January, in a sign the wounds inflicted
by the 2008 financial crisis are healing, helping to boost Wall
The Aussie traded at $1.0482, flat from late U.S.
levels but near two-month high of $1.0497 hit on Tuesday.
The Canadian dollar was firm after gaining 0.5 percent on
Tuesday to trade at C$1.0164 per U.S. unit, near
one-month high of C$1.0160 hit on Tuesday.