CYP weakens vs. EUR

The Cyprus pound continued to slide against the euro, ending Tuesday trading at 0.5780 or 1.7300 in contrast to 0.5744 a month ago and this year’s high of 0.5721 or 1.7480.

Seasonal factors are usually the reason attributed to the minor swings between the CYP and the EUR, which remain locked in the very tight band of plus or minus 2.25%.

With the peak summer season over, there is obviously less money being converted into local currency, explaining why in the summer months, the CYP gains while in the winter months, it loses some of its value.

A second reason may be due to a slowdown in real estate prices, which may have helped reduce demand for euro-priced loans for local housing, whereby people who borrow in euros or other low interest rate currencies, then covert the proceeds into Cyprus pounds, thus generating interest for the local currency.

Analysts however agree that by June 2007 when the effective fixing of the Cyprus pound against the euro will be made in the run up to the introduction of the euro in Cyprus from January 1, 2008, the exchange rate will be “back at 0.5747 or 1.7400.”