The Euro has strengthened from a five-week low against the Japanese Yen after the International Monetary Fund agreed to provide up to €1 billion to aid Cyprus, leading to an increase in demand for European assets.
Against the US Dollar the 17-nation currency has reversed some of its earlier decline against the US Dollar as optimism over the IMF announcement caused demand for riskier assets to improve. The IMF deal will be used to stabilise Cypriot banks and reduce public spending.
The gains are however thought to be temporary as investors have little faith that the IMF will grant the money without having some stipulations attached.
“The headlines on the IMF and Cyprus gave the euro a little bit of a lift,” said Jeremy Stretch, head of foreign- exchange strategy at Canadian Imperial Bank of Commerce in London. “The reality is that IMF help always comes with strings attached.”
And those strings are that the deal calls for Cyprus to restructure its two largest banks, reduce budget deficits and adjust its wage and pension systems.
IMF Managing Director Christine Lagarde said in a statement; “This is a challenging program that will require great efforts from the Cypriot population, we believe that it provides a durable and fully financed solution to the underlying problems facing Cyprus and provides a sustainable path towards recovery.”
The next movement for the Euro is likely to occur tomorrow when the European Central Bank meets tomorrow to decide the regions interest rates. Economists are expecting the Bank to maintain the rate at the current record low level of 0.75%.
As of 12:30pm
The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8477
The Euro to US Dollar exchange rate is currently trading in the region of 1.2812
The Euro to Australian Dollar exchange rate is currently trading in the region of 1.2223
The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.5186
