The Dow Jones FXCM US Dollar Index rallied on the euro weakness in the past session. Tomorrow Cypriot banks will reopen after nearly two-week lockdown. The country’s government decides to put tight capital controls on bank accounts in order to prevent a mass flight of deposits. Yet, when the withdraw restriction is lifted in a week or longer, the money is going to leave anyway as depositors seek to reduce their holdings in banks amid fear of further loss. Increased money demand and fixed monetary supply (Unfortunately Cyprus can’t issue more euro) will push interest rates higher to reach a new equilibrium. However, ... (full story)