FOREX-Euro rises on news of rescue deal for Cyprus

Sun Mar 24, 2013 10:06pm EDT

Related Topics

* Cyprus clinches last-ditch deal with international lenders

* Deal endorsed by euro zone finance ministers

By Masayuki Kitano

SINGAPORE, March 25 (Reuters) - The euro rose broadly on Monday after Cyprus clinched a deal with international lenders for a bailout aimed at saving the country from financial meltdown.

The single currency rose 0.4 percent to $1.3043, having traded at roughly $1.2985 before news of a draft deal for Cyprus reached the market. Against the yen, the euro climbed 0.8 percent on the day to 123.75 yen.

The plan, swiftly endorsed by euro zone finance ministers, involves winding down Popular Bank of Cyprus, also known as Laiki, and shifting deposits below 100,000 euros to the Bank of Cyprus to create a "good bank".

Deposits above 100,000 euros, which under EU law are not guaranteed, will be frozen and used to resolve debts.

German Finance Minister Wolfgang Schaeuble said the Cyprus bailout deal does not require the Cypriot parliament's approval.

Analysts said the euro might rise to roughly around $1.3100 to $1.3150 as investors pare back bearish bets versus the single currency, but were sceptical about the chances of a sustained bounce.

"I have regarded the problems facing Cyprus as being only a short-term trading factor for the market," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.

"I am sticking to the view that the euro will eventually be dragged down due to its economic fundamentals," Karakama said.

The EU had given Cyprus until Monday to raise the 5.8 billion euros it needs to secure a 10 billion euro international lifeline. Without aid, there had been concerns that Cyprus may be forced to exit the euro.

The yen, which tends to rise in times of market stress, retreated broadly, with the dollar rising 0.5 percent to 94.89 yen.

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