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Asia markets up as Cyprus draft deal eases crisis fears Asian markets rise as Cyprus deal eases crisis fears
(35 minutes later)
Asian markets opened higher after officials said a draft bailout deal for Cyprus had been agreed, easing fears of a collapse of its banking system. Asian markets opened higher after officials said a bailout deal for Cyprus had been agreed, easing fears of a collapse of its banking system.
Japan's Nikkei 225 index rose 1.3%, South Korea's Kospi gained 1.5% and Australia's ASX200 was up 0.7%. A failure to reach a deal may have seen the European Central Bank cut emergency funding to Cyprus's two biggest banks.
The EU and IMF had asked Cyprus to raise 5.8bn euros (£5bn) in order to secure a 10bn euros bailout. The fears were that such a move may cause the Cypriot banking system to collapse and even prompt the country's exit from the eurozone.
Last week Cyprus rejected a plan to impose a levy on bank deposits to raise the cash, delaying an agreement. Shares in Japan, South Korea and Australia rose on the news of the deal.
"The news was what markets were waiting for, some kind of an agreement," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo."The news was what markets were waiting for, some kind of an agreement," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.
The European Union gave Cyprus until Monday to raise the 5.8 Japan's Nikkei 225 index rose 1.3%, South Korea's Kospi gained 1.5% and Australia's ASX200 was up 0.7%.
billion euros it needs to secure an international lifeline. The news also boosted the euro.
Without the aid, the European Central Bank will cut funds to The single currency gained 0.8% against the US dollar. It was trading at $1.3044 in early Asian trade.
Cypriot banks and the country may be forced to exit the euro. It rose 1.3% against the Japanese yen to trade at 123.81 yen.
Cyprus has been asked to raise to qualify for Uncertainties remain
Initial reports suggest significant levy on bank deposits of more than 100,000 euros is part of the plan. Cyprus had agreed a bailout deal worth 10bn euros ($13bn; £8.5bn) with the European Union (EU) and the International Monetary Fund (IMF) last week.
Cyprus needs to raise to However, the EU and IMF had asked Cyprus to raise 5.8bn euros in order to secure the funds.
A key meeting of eurozone finance ministers to discuss a bailout for Cyprus to prevent its banking system collapsing has produced a draft deal, officials say. They had proposed that Cyprus impose a one-off levy on bank deposits in order to raise the cash, a move that triggered protests in Cyprus and resulted in savers rushing to ATM machines to withdraw their money - a move that brought fears of a run on the banks.
Initial reports suggest significant levy on bank deposits of more than 100,000 euros is part of the plan. The Cyprus parliament rejected the proposal last week, delaying an agreement to secure the bailout funds.
Cyprus needs to raise 5.8bn euros (£5bn) to qualify for a 10bn-euro EU bailout and avoid bankruptcy. However, reports suggest that the latest deal will include a levy on deposits of more than 100,000 euros in Cyprus' two biggest banks.
The Cypriot president tweeted that discussions were "culminating". The levy on accounts in Laiki Bank - the country's second-biggest - could be as high as 40%, correspondents say.
An EU official told the BBC that under the draft agreement, Cyprus's troubled Laiki (Popular) Bank will be wound down with a levy affecting those with deposits of over 100,000 euros. An EU official told the BBC that under the draft agreement, Laiki Bank will be wound down with "a significant levy" affecting those with deposits of over 100,000 euros.
Large deposits in the country's biggest bank, Bank of Cyprus, could also be hit by the levy, reports say.
Analysts said that while the draft deal had helped ease market jitters, uncertainties surrounding its implementation were likely to hurt sentiment in the coming days.
"We might get a small relief rally if we do get one, but markets will then very quickly turn to the risk of a bank run and whether conditions for the aid will be implemented smoothly," said Greg Gibbs, senior currency strategist at Royal Bank of Scotland.