* Euro hurt by concerns about Cyprus deal, Italian politics
* Investors focus on BOJ moves at April 3-4 meeting
* BOJ tankan:improvement in sentiment tad weaker than f'cast
By Hideyuki Sano
TOKYO, April 1 The euro started the quarter on a
weak note on Monday, staying near a four-month low on worries
that the euro zone's rescue for Cyprus might have opened a can
of worms and as Italy struggles to find a way out of its
The yen was little moved by the Bank of Japan's tankan
survey, which showed Japanese business sentiment had improved
slightly less than anticipated, as investors looked ahead to the
central bank's policy meeting later this week.
The euro traded at $1.2801, down about 0.1 percent
from late Asian trade on Friday and near a four-month low of
$1.2750 hit on Wednesday. European and U.S. markets were closed
for a holiday on Friday.
Having steadily descended from a 14-month peak of $1.3711
hit in February, the euro has major support around $1.2680, a
61.8 percent retracement of its July-February rally. But a break
there could open the way for a test of last year's low near
Against the yen, the common currency fetched 120.68 yen
, not far from a one-month low of 119.745 yen hit on
Thursday and off a three-year high of 127.71 yen hit in
At the weekend, the Cypriot central bank confirmed that
major depositors in Cyprus's biggest bank would lose around 60
percent of savings over 100,000 euros, well above initial talk
of a cut of 30 to 40 percent.
"I don't think cuts in deposits would be applied to every
other country in the euro zone. Still, investors will see some
risk and there are also some issues with Italy, so the euro is
likely to head toward $1.25," said a trader at a European bank.
Investors fear the shock of deposit cuts could tempt savers
in other fragile euro zone countries to shift funds to German
bunds and other safe assets, unwinding months of fund flows of
the opposite direction.
In Rome, President Giorgio Napolitano summoned 10 "wise men"
to propose a series of urgent measures that could be backed by
all parties, as he tries to end the standoff preventing a new
government being formed more than a month after elections.
But the move, in line with a long tradition in Italian
politics, offered little hope of overcoming the deep divisions
among the parties.
The yen barely moved after the BOJ's tankan survey, which
also showed companies' capital spending plans were much weaker
than economists had expected, even as Prime Minister Shinzo
Abe's push for easy monetary policy has boosted Japanese share
prices over the past few months.
"The weak capex plans suggests that companies do not feel
confident about spending even though 'Abenomics' has boosted
markets," said Yunosuke Ikeda, senior currency economist at
Nomura Securities. "In the past, when companies were bullish on
spending, Japanese investors became eager to take more risks in
foreign bond investment, so the data was mildly negative for the
The dollar traded at 94.30 yen, almost flat on the
day, but above its March 18 low of 93.45 yen, supported by
expectations of strong easing from the Bank of Japan at its
monetary policy review on April 3-4.
The BOJ is widely expected to scale up its bond buying and
to extend the maturities of the bonds it purchases under new
Governor Haruhiko Kuroda.
"Much of the aggressive easing has been already priced in
and the dollar could fall below 94 yen on profit-taking. Still,
investors will focus on the contrast between the BOJ, which is
to expand stimulus, and the Fed, which is seeking an exit from
stimulus," said Ikeda, adding that the dollar is likely to
The dollar has risen 20.9 percent in the last two quarters,
rising as high as a 3-1/2 year high of 96.71 yen last month as
investors bet on a radical shift in the BOJ's policy
The Aussie was subdued at $1.0407, down slightly
from late last week and off a two-month high of $1.0497 hit last