Cypriot Banks to Remain Closed Until Thursday

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Contrary to earlier reports, all banks in Cyprus will remain closed until Thursday, 28 March, including the two largest ones, Laiki Bank and the Bank of Cyprus.

According to the central bank, this move is made to ensure that the banking system runs smoothly. Meanwhile, Cyprus President Nicos Anastasiades said that there will be "very temporary restrictions" on capital flows without elaborating further on the statement.

The extended closure of Cypriot banks means larger depositors of the country's two biggest banks would lose even more money than expected. Banks have been closed since last week, 15 March.

As previously reported on FX Strategy, depositors of Laiki Bank and the Bank of Cyprus with over EUR100k in deposits would fund the money that the EUR5.8 billion that the country needs to raise. Majority of affected depositors are Russians, who will not be able to access their accounts until the completion of bank restructuring. Uninsured depositors, meanwhile, are bound to lose about 30% due to the current development.

Dutch finance minister Jeroen Dijsselbloem has already downplayed the event as a banking crisis, rather than the Eurozone's return to an economic crisis. He also mentioned that he sees the country recovering from the situation quickly. And although there are no more indicators of Cyprus bailing out of the EU, concerns remain that the current situation in the country would create a ripple effect on the region, with investors withdrawing from other struggling EU economies. Such as scenario would further aggravate the region's situation, which continues to struggle to bounce back.

Meanwhile, the EUR/USD pair hit 1.2882 in the late Asian trade before consolidating at 1.2883 for a 0.24% increase. Concerns about the current bank rescues in the Eurozone continue to limit the growth of the euro. The currency also rose against the GBP with the EUR/GBP rising by 0.03% to hit 0.8470.

By FX Strategy Team, Published on 26th of March 2013
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