Forex - Dollar firms as Cyprus bank tax plans spark safe-haven demand

Investing.com - The U.S. dollar shot up against most major currencies on Monday after a European Union bailout package for Cyprus involved slapping a tax on bank depositors, which rattled nerves across the planet throughout the trading session.

In U.S. trading on Monday, EUR/USD was down 1.07% at 1.2936.

The one-time tax taking aim at Cypriot bank deposit holders forms part of a EUR10 billion bailout deal, and the proposal sent the dollar gaining against most other currencies due to fears unease may grow since smaller depositors may be affected.

The move also spooked investors on sentiment that an era of eurozone bailouts that avoided touching bank deposits may now be ending, which bolstered the dollar's safe-harbor appeal.

The euro and other currencies eventually found support after the Cypriot parliament delayed voting on the measure and mull ways to possibly soften the blow on smaller depositors.

Moscow was quick to blast the move in Cyprus, home to large amounts of Russian deposits.

The events in Cyprus served as the dollar's chief steering current on Monday.

Elsewhere, the eurozone reported that its trade surplus narrowed to EUR9 billion in January from EUR10.3 billion in December.

Analysts were expecting the surplus to widen to EUR10.9 billion.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.09% at 1.5097.

The dollar was down against the yen, with USD/JPY trading down 0.12% at 95.19, and up against the Swiss franc, with USD/CHF trading up 0.77% at 0.9461.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.26% at 1.0221, AUD/USD down 0.19% at 1.0392 and NZD/USD trading down 0.36% at 0.8246.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.70% at 82.92.

On Tuesday, markets will continue to track events in Cyprus.

Elsewhere, the U.S. is to release official data on building permits, a leading indicator of future construction activity, and data on housing starts.