Q: The symbol below is obviously a joke, but i never quite understood how the Euro could have more value than the dollar given all the non addressed banking issues, higher unemployment, and deep recession scenarios. Strange no?
“The euro slumped the most in 14 months against the dollar after an unprecedented levy on bank deposits in Cyprus threatened to throw Europe back into crisis.
The 17-nation currency dropped to a two-week low versus the yen after Cypriot President Nicos Anastasiades bowed to demands by regional finance ministers to raise 5.8 billion euros ($7.48 billion) by taking a piece of every bank account in Cyprus. The yen strengthened against all 16 of its major counterparts after Anastasiades delayed a vote on the measure in parliament until today. The New Zealand dollar and Mexican peso weakened as investors sold higher-yielding currencies.
“The measure makes people nervous that this may happen to other countries in the future and there could be a flight of capital out of the region,” said Mansoor Mohi-uddin, head of currency strategy at UBS AG in Singapore. “This adds to our bearish view on the euro, and we expect the currency’s downtrend to begin again.”
The euro slid 0.9 percent to $1.2962 at 6:11 a.m. in New York after dropping as much as 1.5 percent, the biggest decline since Jan. 13, 2012. The common currency declined 1.1 percent to 123.21 yen after sliding to 121.15, the weakest level since March 5. The yen gained 0.2 percent to 95.05 per dollar.
Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member currency bloc since the European Central Bank’s pledge in September to backstop troubled nations’ debt.
