FOREX-Euro almost at the brink of a 4-month low on dread over Cyprus downturn, yen continues to go stronger

The euro went down at the start of the week towards a predicted four-month low dreading an impending spillover from the Cyprus bailout agreement while the Australian dollar was tripped up following reports of a slower rebound in the Chinese economy, specifically in the factory sector.

The yen was growing firmer with larger purchases of the Japanese currency made headlines on the day with a low liquidity and few participating traders with most markets closed for the Easter holiday. The euro began a new quarter with a sob, moving down 0.2 % to $1.2791which was slightly above its four-month low of $1.2750 last week. The currency has since slid on a steady pace since February when it reached a 14-month high of $1.3711.

The Cypriot central bank confirmed that the major depositor in Cyprus’s largest bank would lose as much as 60 % of its savings over €100,000 which was above the initial tight estimate of 30-40 per cent.

The euro has basically a steady support of about $1.2680, a 61.8 % retracing of its July-February rally, but a break there could potentially open the way for a test of last year’s shortcoming of just $1.20.

The borrowing cost in Slovenia is seen by economists as one of the possible candidates for a major euro zone bailout, went over 100 basis points in the aftermath of the Cyprus bailout, while the Italian borrowing costs have gone past their highest limit since November at a five-year bond auction which was made last week.

At the weekend, the Italian president spearheaded the 10 ‘wise men’ to put forward a series of pressing measures that could be supported by all parties, but the plan moves resulted in little optimism of overcoming the deep political divide that is currently ensuing in the government. The growing appetite for the Italy’s debt has been hurled into a deadlock by the country’s politics since the indecisive elections reinforced the common currency’s limitations.

The Australian dollar fell 0.3 % to $1.0393, edging closer to maintain its 200-day moving average that is now at $1.0383. Moreover, the Australian dollar also declined to 0.6 % to just 97.55 yen.
Investors had recently conveyed their frustration over a narrow improvement in the Japanese business outlook over the last quarter as revealed by the Bank of Japan’s tankan survey while the attention is concentrated on the central bank’s policy review.

The BOJ is anticipated to enhance its bond purchases and give extensions to the bonds’ maturity under the new presiding Governor. The stakes were high on a radical shift by the BOJ’s policy ramping the dollar up 20.9 % against the yen in the past two quarters, pushing it further to a 3.5 year high of 97.71 last month.

Market participants mentioned that their mood is very idle ahead of the European Central Bank’s monetary policy appraisal this week along with the U.S. payroll figures.