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FOREX-Euro rises broadly on hopes of Cyprus deal
March 22, 2013 / 8:50 PM / 5 years ago

FOREX-Euro rises broadly on hopes of Cyprus deal

* Eurogroup finance ministers to meet Sunday
    * Cyprus says close to a deal to unlock bailout money
    * Euro registers first weekly gain since early February

    By Wanfeng Zhou
    NEW YORK, March 22 (Reuters) - The euro rose against the
dollar on Friday, posting its first weekly gain in seven weeks
on hopes Cyprus will find a solution before Monday to avert a
financial meltdown.
    Finance ministers of the 17-nation euro zone will hold talks
on Sunday on the bailout crisis in Cyprus, two euro zone sources
told Reuters on Friday. 
    The meeting was scheduled as Cypriot leaders said they were
closing in on a deal to raise enough money in return for a
bailout and as the country reached a deal to spin off the Greek
units of its debt-ridden banks. 
    The EU has given Cyprus until Monday to raise the 5.8
billion euros it needs to secure a 10 billion euro international
lifeline. Without aid, the European Central Bank will cut funds
to Cypriot banks and the country may be forced to exit the euro.
    "Although there are still significant uncertainties, our
base-case scenario is that a deal will be reached" by the
deadline, said Vassili Serebriakov, currency strategist at BNP
Paribas in New York.
    The euro rose 0.7 percent to $1.2994, with traders
citing buying by a UK bank. It hit a four-month low of $1.2843
earlier in the week after Cyprus rejected a proposal to tax bank
deposits in exchange for a European Union bailout.
    On the week, the euro rose 0.5 percent.
    Cypriot leaders are discussing with their international
lenders the adoption of a levy of more than 10 percent on bank
deposits over 100,000 euros ($130,000), a ruling party official
    Even though the crisis in Cyprus has sparked fears of bank
runs in other troubled euro zone economies, bond yields in Spain
and Italy have been stable, suggesting little signs of market
    Citigroup, in a note to clients, said with Cyprus being such
a small piece of the euro zone and with G10 countries holding
such small amounts of Cypriot assets, the impact of even
worst-case scenarios on the euro may not be bigger than 1 to 2
    "In some ways, the worst-case scenario for the euro was the
ugly precedent that would have been sent by the rejected deposit
tax," the firm said. "A solution that results in bigger losses
for some stakeholders but a prettier final precedent from this
crisis could prove mildly euro positive at this juncture."
    Strategists said the euro could struggle to break above
$1.30 as recent data underscored a worrying outlook for the euro
zone economy.
    Against the yen, the euro hit a two-week low of 121.45 yen
 after Germany's Ifo survey of business morale fell
short of expectations.. It later recovered and
was last trading up 0.3 percent at 122.72 yen.
    Asian investors were cited as buyers of short-dated options,
betting on drops to 121 and 120.50 yen.
    The dollar fell 0.4 percent to 94.51 yen, having
earlier fallen to 94.18 yen. The highly liquid Japanese currency
tends to be bought during times of economic uncertainty and
heightened financial market stress.
    On the week, the dollar gained about 0.1 percent.
    On Thursday the dollar shed about 1.2 percent as investors
covered their negative yen bets after new Bank of Japan Governor
Haruhiko Kuroda disappointed investors who had expected stronger
hints of aggressive monetary easing.
    The dollar index, which tracks the greenback versus a
basket of currencies, fell 0.4 percent to 82.384, retreating
further from last week's seven-month high of 83.166.
    Sterling rose 0.4 percent to $1.5228, paring gains
after Fitch Ratings warned it was likely to downgrade Britain in
the coming weeks, citing high government debt levels and weak

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