Cyprus prepares to lock currency with euro

Cyprus is readying to lock the pound with the euro after which the official countdown will begin for the introduction of the common currency on January 1, 2008.

On Tuesday, July 10, the Council of Europe is expected to take the historic decision with a unanimous vote to lock the value of the Cyprus pound with the euro.

By the close of business Tuesday, the CYP was steady at 0.5825-0.5840 against the euro and all indications suggest that the final rate at which the local currency will be locked with the euro will hover between 0.5840 to 0.585274.

This is the same rate at which the Cyprus pound entered into the ERM II on May 2, 2005, a year after Cyprus officially became an EU member.

If the final rate is fixed at 0.585274 or 1 CYP/EUR 1.7086, then it will also be the same rate at which on June 19, 1992 Cyprus unilaterally pegged its currency to the predecessor of the euro, the ECU. Since then, the Cyprus pound has always traded within the tight plus or minus band of 2.25% from the central rate, even though under the ERM II rules, the degree of fluctuation was plus or minus 15%.