* Euro struggles on Cyprus uncertainty
* Single currency hovers near Tuesday's four-month low
* British budget in focus, after BoE minutes
* Fed meeting and Bernanke watched for hints on QE
By Anooja Debnath
LONDON, March 20 The euro held firm against the
dollar on Wednesday as buyers emerged after the single
currency's slide to a four-month low following Cyprus's
rejection of the terms of a proposed bailout.
The Cypriot parliament overwhelmingly rejected a proposed
levy on bank deposits as a condition for a European bailout on
Tuesday, throwing international efforts to rescue the latest
casualty of the euro zone debt crisis into disarray and
triggering a sell-off in the euro.
However, the general assumption in markets was that
policymakers would cobble together a deal to keep Cyprus in the
The single currency was up 0.1 percent at $1.2890,
near its 200-day moving average of $1.2876, which could provide
near-term support. On Tuesday, it dropped below that support and
touched a four-month low of $1.28435 on trading platform EBS.
The shaky recovery in the euro was attributed to buyers
emerging on dips and also as short euro positions were seen as
over-extended. But strategists said the euro would be capped at
around $1.2980 and any uncertainty could push it towards the
"The euro hasn't fallen much lower after yesterday as
markets in Europe are used to getting a solution at the very
last minute, so it isn't completely a risk off environment,"
said Lutz Karpowitz, currency analyst at Commerzbank.
Karpowitz added that the European Central Bank's assurance
that it was committed to providing liquidity to Cypriot banks
within certain limits had also helped curb euro losses, but said
the present uncertainty would keep the euro vulnerable.
Strategists also said they would continue to sell the euro
on any rebounds, limiting gains.
The unprecedented plan to impose a levy on citizens' savings
in Cyprus, announced over the weekend, has stirred worries that
savers in other, larger European countries might withdraw their
deposits. There is also concern that it could be repeated in any
future bailouts in the euro zone.
CENTRAL BANK FOCUS
Markets will also keep an eye on minutes of the Bank of
England's latest policy meeting and Federal Reserve chief Ben
Bernanke's news conference after its meeting later in the day.
British finance minister George Osborne's budget at 1230 GMT
and possible changes in the BoE's remit to allow more leeway on
inflation targeting will also be in focus.
Sterling was down 0.3 percent on the day at $1.5047.
Some in the market are expecting the BoE to signal more
stimulus in the coming months. The Fed is expected to keep
buying $85 billion a month in mortgage and Treasury bonds in an
effort to bolster an economic recovery.
"The core members of the (Fed) committee driving policy are
likely to reinforce the message that policy remains highly
accommodative for a prolonged period despite the recent
improvement in U.S. data, supporting U.S. asset markets,"
analysts at Morgan Stanley said in a note.
"Hence, we believe that the dollar will remain attractive,
not just as a safe haven, but also as an investment
In Japan, the market was wary of any comments from Haruhiko
Kuroda, who becomes governor of the Bank of Japan on Wednesday.
Expectations are high that the BOJ will embark on a much more
aggressive monetary policy to fight deflation.
The dollar was up 0.2 percent against the yen at
95.35 while the euro was up 0.2 percent at 122.85 yen