The Cypriot parliament rejected a planned levy on bank deposits on Tuesday, throwing a European bailout plan for the tiny economy into disarray.
The vote was overwhelming, 36 with against and 19 abstentions, and brings Cyprus to the brink of financial collapse.
Shortly after the vote, the euro fell 0.8 of a cent to $1.2874, its lowest level for three months. The euro has been on the slide since it became clear that even the government's own party would not stand behind the deal.
News that MPs had resoundingly rejected the bailout was greeted with applause and cries of "bravo" from the crowds outside the Cyprus parliament, according to those at the scene.
MPs in the main government party abstained, and most of the other members of the tiny legislature else voted against. There were no votes in favour of the deal.
Cyprus's banks were due to open again on Thursday, but there is already speculation that the current bank holiday could be extended. Next Monday is also a scheduled bank holiday, so the prospect of a longer period of disruption is possible.
EU countries said before the vote that they would withhold €10bn in bailout loans unless depositors in Cyprus shared the cost of the rescue, and the European Central Bank has threatened to end emergency lending assistance for teetering Cypriot banks.
After the vote, the ECB said it remained committed to providing liquidity to Cyprus's banks "within the existing rules".
"The ECB takes note of the decision of the Cypriot parliament and is in contact with its troika partners. The ECB reaffirms its commitment to provide liquidity as needed within the existing rules."