Investing.com - The U.S. dollar pared gains against the euro on Monday and pulled back from session lows against the yen, but safe haven demand remained supported as a controversial bailout deal for Cyprus rekindled fears over the debt crisis in the euro zone.
During European morning trade, the dollar pulled back from three-month highs against the euro, with EUR/USD down 0.87% to 1.2963, up from session lows of 1.2882.
On Saturday, the European Union and International Monetary Fund reached an agreement on a EUR10 billion bailout for Cyprus. In return for the bailout international creditors demanded that all bank customers must pay a one-time tax on deposits.
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.
The agreement triggered a run on cash machines in Cyprus over the weekend and sparked fears over a disruption to financial markets in the euro zone.
Market sentiment firmed up following reports that the government in Cyprus was preparing a new deposit tax proposal to lessen the impact on smaller savers. The parliament was to vote on whether to approve the tax proposal later Monday.
The dollar retreated from session lows against the yen, with USD/JPY down 0.41% to 94.90, after falling to 94.09 earlier in the trading day.
The greenback turned lower against the pound, with GBP/USD easing up 0.13% to 1.5129.
Elsewhere, the greenback was higher against the Swiss franc, with USD/CHF up 0.43% to 0.9428.
The greenback was broadly higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD up 0.36% to 1.0230, AUD/USD sliding 0.35% to 1.0375 and NZD/USD losing 0.33% to trade at 0.8246.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.55% to 82.80.
International creditors are believed to have insisted on the deposit levy because of the large amount of Russian capital kept in Cypriot banks, amid fears of suspected money-laundering.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
