Euro Climbs as ECB Buys Cyprus Time to Renegotiate Rescue Deal
By Emma Charlton - Mar 20, 2013
The euro strengthened for the first time in three days against the dollar on speculation the European Central Bank’s pledge to provide liquidity to Cyprus will give it time to renegotiate a financial rescue package.
Europe’s shared currency rose from near the lowest level in almost four months. The ECB reaffirmed its commitment to offer funding to Cyprus “within the existing rules” yesterday, after Cypriot lawmakers rejected an unprecedented levy on bank deposits, throwing into limbo a rescue package designed to keep it in the euro. The Dollar Index fell before a two-day meeting of Federal Reserve policy makers ends today.
“The ECB statement that they are going to provide more liquidity means there is some time for renegotiation for Cyprus, so that’s a positive,” said Lutz Karpowitz, a senior foreign- exchange strategist at Commerzbank AG in Frankfurt. “As long as there is still some room for further negotiations the market is relatively relaxed. On the negative side, it seems it will be very difficult to find a consensus. If there is more and more impression that there won’t be a solution then there may be more weakness in the euro.”
The euro climbed 0.1 percent to $1.29 at 8:09 a.m. London time. It fell to $1.2844 yesterday, the weakest level since Nov. 22. The shared currency rose 0.3 percent to 122.92 yen and advanced 0.2 percent to 1.2221 Swiss francs. The dollar strengthened 0.1 percent to 95.28 yen.
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trade partners, fell 0.1 percent to 82.898, after climbing 0.9 percent in the past two days.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
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