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Asian markets rise as Cyprus deal eases crisis fears | Asian markets rise as Cyprus deal eases crisis fears |
(about 1 hour later) | |
Asian markets opened higher after officials said a 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. |
A failure to reach a deal may have seen the European Central Bank cut emergency funding to Cyprus's two biggest banks. | A failure to reach a deal may have seen the European Central Bank cut emergency funding to Cyprus's two biggest banks. |
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. | 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. |
Shares in Japan, South Korea and Australia rose on the news of the deal. | 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. |
Japan's Nikkei 225 index rose 1.3%, South Korea's Kospi gained 1.5% and Australia's ASX200 was up 0.7%. | Japan's Nikkei 225 index rose 1.3%, South Korea's Kospi gained 1.5% and Australia's ASX200 was up 0.7%. |
Broader gains | |
The developments in Cyprus over the past few days had once again triggered fears that the eurozone crisis may be escalating. | |
The biggest fear was that Cyprus might have had to leave the eurozone, if a deal was not agreed upon in time. | |
Many analysts had been concerned that Cyprus's exit from the bloc may cause a loss of confidence across the eurozone and prompt investors to withdraw from other troubled economies of the bloc, such as Greece. | |
These concerns had seen investors ditch the euro over the past few days in favour of other assets seen as relatively safer. | |
News of the Cyprus deal boosted the euro. | |
The single currency gained 0.8% against the US dollar. It was trading at $1.3044 in early Asian trade. | The single currency gained 0.8% against the US dollar. It was trading at $1.3044 in early Asian trade. |
It rose 1.3% against the Japanese yen to trade at 123.81 yen. | It rose 1.3% against the Japanese yen to trade at 123.81 yen. |
Uncertainties remain | Uncertainties remain |
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 had agreed a bailout deal worth 10bn euros ($13bn; £8.5bn) with the European Union (EU) and the International Monetary Fund (IMF) last week. |
However, the EU and IMF had asked Cyprus to raise 5.8bn euros in order to secure the funds. | However, the EU and IMF had asked Cyprus to raise 5.8bn euros in order to secure the funds. |
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. | 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. |
The Cyprus parliament rejected the proposal last week, delaying an agreement to secure the bailout funds. | The Cyprus parliament rejected the proposal last week, delaying an agreement to secure the bailout funds. |
However, reports suggest that the latest deal will include a levy on deposits of more than 100,000 euros in Cyprus' two biggest banks. | 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 levy on accounts in Laiki Bank - the country's second-biggest - could be as high as 40%, correspondents say. | 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, Laiki Bank will be wound down with "a significant 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. | 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. | 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. | "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. |