Euro slides as controversial move sparks concern
THE euro experienced its steepest fall in 14 months and stocks slumped in response to Cyprus's divisive bailout plan, prompting fears that the region's debt crisis will reignite.
The unprecedented levy to be applied to Cypriot savings has shaken market confidence in the euro and raised concerns as to how far member states are prepared to interfere with privately owned money.
The euro hit more than a three-month low against the dollar.
By the close of trading yesterday, the UK's FTSE 100 and Germany's DAX slid 0.4pc, while France's CAC 40 lost 0.5pc. Irish shares bucked the trend with the ISEQ rising 1.41pc.
Investors fled to safer currencies and commodities like gold in response to the news that Cypriot deposits of more than €100,000 would be hit with a 9.9pc levy, with a 6.75pc levy for anything below that threshold.
The dollar and yen were up and the pound jumped to a five-week high. Yields on UK government bonds fell to their lowest this year.
The shift away from treating bank deposits as sacrosanct, evident in Ireland's own deposit guarantee, resulted in a rise in the borrowing costs of financially troubled eurozone countries.
Spain and Portugal's 10-year rate climbed sharply. In contrast, the yields fell on German bonds, the traditional safe haven for risk-averse investors.
In the US, the Dow Jones industrial average was down around 0.3pc yesterday morning.
Tokyo closed down 2.71pc. Sydney fell 2.05pc to a two-week low. Hong Kong lost 2pc and Shanghai shed 1.68pc.
Markets will be keenly watching the developments today when the Cypriot parliament is due to vote on the controversial deal.