Euro plummets on Cyprus bailout turmoil

The euro sank against other major currencies Monday after the proposed bailout for Cyprus, including a steep tax on bank depositors, revived concerns about the eurozone. At 2100 GMT, the euro was valued at $1.2957, down from $1.3075 late Friday. The euro also lost ground to the Japanese yen, trading at 123.41, compared with 124.61 late Friday. The dollar meanwhile edged down slightly to 95.23 yen from 95.26 yen. The euro's retreat came as protests erupted in Cyprus against the deposit tax required under the 10 billion euro European Union-International Monetary Fund rescue of the island nation. Under the current plan, savers with up to 100,000 euros would be taxed at 6.75 percent, while savers with larger accounts pay a levy of up to 9.9 percent. The one-time move was aimed at raising 5.8 billion euros for the government. European officials signaled Monday they might adjust the tax so that it causes less of a burden on those with more modest incomes. The controversy kept pressure on the euro. "The Cyprus bailout has set the tone for trading in an extremely data and event risk heavy week by reawakening the fear of contagion," said Kathy Lien of BK Asset Management. "At bare minimum, there could be a capital flight out of European banks." The policy, if enacted, would be a "blow to confidence in Europe's banking sector," she added. The Cyprus situation exposes the eurozone's "Achilles' heel", wrote John Kicklighter, senior currency strategist at DailyFX. "The situation has revived fears of systemic financial troubles in Europe," he said. "The situation in Cyprus is still murky and is likely to play on fears through the rest of this week." Besides Cyprus, currency traders were also eying the leadership change at the Bank of Japan and a Wednesday policy statement by the US Federal Reserve. Among other currencies, the British pound traded at $1.5107, down from $1.5129 Friday. The dollar was at 0.9462 Swiss francs, up from 0.9377 late Friday.