Cyprus bailout: Euro falls to three-month low on Cyprus fears
NEW YORK (REUTERS) - The euro tumbled to a more than three-month low against the United States (US) dollar on Monday after a Cypriot plan to tax bank deposits as part of an European Union (EU) bailout deal sparked fears the euro zone's larger troubled economies such as Spain and Italy may follow suit.
The weekend move broke with previous practice that viewed depositors' savings as sacrosanct and raised fears that a scramble to withdraw cash could spread to larger states seen as possible bailout candidates. Both Spanish and Italian bond yields rose.
But some analysts said losses in the euro should be contained. Cyprus is a very small euro zone economy and many believed the move is a one-off measure that is unlikely to be repeated in other peripheral euro zone countries.
"Cyprus has long functioned as an offshore financial center, particularly for Russians," said Mr Karl Schamotta, senior strategist at Western Union Business Solutions in Calgary. "Few in Italy or Spain expect the same to happen at home, given that their countries do not function as offshore tax havens. A wider bank run will probably require a bigger trigger.