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Forex Flash: Cypriot/Italian tensions have iron jawed European yields - BBH

FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that the combination of the heightened tensions due to Cyprus and the unresolved Italian political situation has widened the iron jaw in Europe's rates.

They see that German bund yields fell, with the 10-year recording its lowest yield since early last August, and Italian yields are approaching their highest level since the start of the month, up more than 30 bp this week. They see that the widening premium throughout the periphery may be an issue for the ECB as Draghi has interpreted this in the past to be a breakdown of the transmission mechanism of monetary policy. They write, “We have argued that breakdown is due to the recycling mechanism by which creditors' surpluses were used to finance the deficit countries.”

Forex: EUR/JPY sideways just below 121.00

After going as low as 119.75 in mid-European morning, the EUR/JPY bounced back above the 120.00 handle and fully retraced its losses. The market has now been moving sideways between 120.70 and the 121.00 mark, with no particular direction defined yet.
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Forex Flash: Cyprus banks reopen but EUR continues to look vulnerable – UBS

All commercial banks in Cyprus opened their doors today – in many cases after the first time in 12 days. An official from the Central Bank of Cyprus has already announced some measures intended to restrict transactional activities. According to Research Analyst Gareth Berry at UBS, “These are not likely to prevent a bank run, but should at least slow the pace of deposit withdrawals.”
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