Euro Near Four-Month Low on Cyprus Contagion Concern, Yen Gains

The euro traded 0.2 percent from a four-month low versus the dollar on concern that future European bailouts could include the kind of bank deposit levies imposed on Cyprus.

The 17-nation currency headed for its biggest weekly decline in seven with Italian political parties still deadlocked ahead of a deadline today for forming a government. The yen gained against most of its major peers before Bank of Japan (8301) Governor Haruhiko Kuroda appears before upper house lawmakers ahead of a policy meeting next week.

“There is concern what’s happened in Cyprus is setting a precedent for what could potentially happen to deposit holders in other parts of the zone,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “I suspect Italian politics could weigh on the euro.”

The euro was unchanged at $1.2780 as of 9:30 a.m. in Tokyo from yesterday, when it touched $1.2751, the lowest since Nov. 21. The shared currency was little changed at 120.69 yen, following a 0.6 percent drop yesterday. The yen traded at 94.42 per dollar from 94.46.

The euro has declined 1.6 percent against the greenback this week, the most since the five day’s ended Feb. 8, and 1.6 percent versus the yen. Japan’s currency is little changed against the dollar since March 22.

Financial markets will be closed tomorrow for a holiday in most of Europe, the U.S., and much of Asia.

(Source: Bloomberg)