NZ dollar holds near recent lows as Cyprus fears sap risk appetite

The New Zealand dollar held near its recent lows following the euro-zone’s bailout plan for Cyprus that included clipping the island’s bank deposits, stoking concern the same demand could occur in nearby nations and spark a run on banks.

The kiwi dollar traded at 82.27 US cents from 82.29 cents at the start of the day and down from 82.72 cents in late New York trading on Friday. The trade-weighted index was at 75.71, from 75.64 earlier in the day and down from 75.85 on Friday.

Traders are pondering the prospects for the effects of the 10 billion euro Cyprus bailout plan spreading to countries such as Spain and Italy as consumers fret their deposits aren’t safe any longer, which could drive up bond yields. The Cyprus announcement brought the focus back onto Europe, which is still struggling to find common ground on the region’s debt crisis.

“What we’re seeing is a general risk-off move, including the New Zealand dollar, which gapped significantly lower at the open following the update from Cyprus,” said Stan Shamu, a market analyst at IG Markets. “In the event Europe’s news gets worse in the next few weeks, risk in general will struggle and people will rush back to the US dollar and the yen.”

Cyprus’s financial strength has been eroded by exposure to neighbouring Greece and among measures proposed in Brussels is for the nation’s savers to forfeit 9.9 percent of their deposits.

Waning risk appetite spread through the Asia Pacific, with most major equity indexes falling.

The kiwi rose to 63.76 euro cents from 63.25 cents on Friday and fell to 54.47 British pence from 54.73 pence. It traded little changed at 79.41 Australian cents and sank to 77.92 yen from 78.80 yen.