Loonie pulls back as European concerns grow on proposed Cyprus bank levy

TORONTO – The Canadian dollar pulled back Monday as the Mediterranean island nation of Cyprus announced a planned levy on bank deposits that roiled international markets.

The loonie fell 0.29 of a cent to end at 97.82 cents US.

In Cyprus, lawmakers postponed until Tuesday night a vote on a deposit tax of 6.75 per cent on accounts of up to €100,000 (US$131,000) and 9.9 per cent on accounts over that amount.

The tax is among conditions demanded by international creditors in order for Cyprus to get €10 billion (US$13 billion) in bailout loans.

The tax on ordinary citizens’ savings is an unprecedented step in Europe’s 3 1/2-year-old debt crisis and has stoked fears of bank runs in the other 16 countries that use the euro.

“There is quite a lot to navigate through with all that is occurring and if Cypriot concerns remain and the (U.S.) Federal Open Market Committee statement is hawkish” the loonie could drop further, John Curran, senior vice-president of CanadianForex Ltd., said in a note.

The two-day FOMC meeting begins Tuesday and is widely expected to affirm the Fed’s plans to continue its US$85 billion monthly bond purchases, though comments could provide more certainty on how much longer the program will last.

In commodities, the April crude contract on the New York Mercantile Exchange rose 29 cents to end at US$93.74 a barrel.

Copper took a significant hit from the concerns in Europe, with the May contract losing 9.3 cents to settle at US$3.43 a pound. April bullion rose $12 to settle at US$1,604.60 an ounce.