Dollar off highs vs. euro with Cyprus in focus

Investing.com - The U.S. dollar pulled back from three-month highs against the euro and pared losses against the yen on Monday but investors remained wary following news that a levy was to be imposed on bank deposit holders as part of a bailout deal for Cyprus.

During U.S. morning trade, the dollar was sharply higher against the euro, with EUR/USD down 0.92% to 1.2955, after falling to a three-month low of 1.2882 earlier Monday.

The single currency weakened broadly following news that a once-off tax was to be imposed on bank deposit holders as part of a EUR10 billion bailout deal for Cyprus.

The agreement marked the first time since the onset of the euro zone debt crisis that depositors have been forced to take a haircut in return for financial aid and triggered a run on cash machines in Cyprus over the weekend.

Market sentiment found support following reports that a parliamentary vote on the levy was to be postponed until Tuesday amid reports that the government was preparing a new deposit tax proposal to lessen the impact on smaller depositors.

The dollar pulled away from session lows against the yen, with USD/JPY down 0.37% to 94.95, after falling as low as 94.09 earlier in the trading day.

The dollar was little changed against the pound, with GBP/USD dipping 0.01% to 1.5109.

Elsewhere, the dollar gained ground against the Swiss franc, with USD/CHF rising 0.67% to 0.9451.

The greenback was broadly higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD up 0.24% to 1.0218, AUD/USD sliding 0.19% to 1.0392 and NZD/USD falling 0.39% to 0.8243.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.56% to 82.81.

The eurogroup of euro zone finance ministers was to hold a teleconference later Monday to discuss the situation in Cyprus.