Forex Flash: Moody’s weighs on Cyprus and Eurozone – UBS

FXstreet.com (Barcelona) - Cypriot banks had their savings threatened by a weekend agreement between the troika and the Cypriot government. The plan, in its current form, seeks to apply a 6.75% 'tax' on deposits below €100k. The tax rate rises to 9.9% for deposits above €100k. Although Cyprus is the fifth Eurozone country to request external financial assistance, this is the first time that depositors have been called on to contribute to the rescue effort.

Accordingly, “during Asian trading, the EUR/USD dropped over 150 pips with investors expressing concern over the possibility of a local bank run, which could potentially have knock-on consequences for other vulnerable sovereigns in the region. Since then however, the EUR/USD has rallied somewhat.” notes Research Analyst Gareth Berry at UBS. Moody's chimed in on this point overnight noting that the weekend decision is a credit negative for depositors across Europe.