* Cyprus rejects bailout terms; last minute deal hopes still
* MSCI Asia ex-Japan share index hits 2013 low before
* Euro down versus yen
* Fed meeting outcome also in focus
* Japanese markets closed for holiday
By Ian Chua
SYDNEY, March 20 Asian shares and the euro
struggled on Wednesday after a bailout plan for Cyprus fell into
disarray, but losses were limited on investors' hopes that a
last minute deal was still within reach.
Cyprus's parliament overwhelmingly rejected a proposed tax
on bank deposits as a condition for bailout aid, pushing the
Mediterranean island a step closer to the brink of financial
But the European Central Bank (ECB) offered some comfort by
saying it was committed to providing liquidity within certain
limits, even after having threatened to end emergency lending
assistance for teetering Cypriot banks.
"It is relatively calm for now, but headline risks remain
acute," said Sue Trinh, strategist at RBC in Hong Kong.
"Clearly the 'no' vote was not an ideal situation. The
government now has to scramble for last minute options and it
remains uncertain how exactly it will unfold."
The finance minister of Cyprus is in Moscow to scout for
support amid speculation Russia could step up, while newly
elected President Nicos Anastasiades is due to meet party
leaders on Wednesday to explore a way forward.
The MSCI's broadest index of Asia-Pacific shares outside
Japan was flat, having earlier carved out a
fresh 2013 trough. The index is now down around 3 percent from
this year's peak set a month ago.
South Korean shares lost 0.4 percent, while their
Australian counterparts shed 0.1 percent. Hong Kong
stocks edged up 0.8 percent, while Chinese shares
climbed 1.7 percent, continuing to recover from Tuesday's fall
to a 2-1/2 month low.
Japanese financial markets were shut for a holiday.
The mixed performance in Asia mirrored Wall Street, which
saw the S&P 500 index close lower for a third day, while
the Dow Jones industrial average ended flat after
recouping early losses.
Commodity markets were also calmer with U.S. crude
little changed at $92.35 a barrel. Copper was off a
seven-month trough and spot gold held near a three-week
high set on Tuesday.
EURO UNDER PRESSURE
Uncertainty surrounding Cyprus kept the euro pinned near
four-month lows against the U.S. dollar. The euro fetched
$1.2876, having fallen as far as $1.2844 overnight.
The common currency lost ground against the yen, shedding
0.2 percent to 122.35, near a two-week low of 121.45
Yen bulls will be wary of any comments from Haruhiko Kuroda,
who becomes governor of the Bank of Japan on Wednesday.
Expectations that Kuroda will quickly embark on a much more
aggressive monetary policy to fight deflation have recently
pushed the yen to multi-year lows versus the euro and dollar.
The dollar index, which tracks the greenback's
performance against a basket of currencies, was flat at 82.971
but not far from a seven-month peak of 83.166 set a few days
Investors will also keep an eye on the outcome of the
Federal Reserve's two-day policy meeting due to end later on
Analysts expect the Fed to keep buying $85 billion a month
in mortgage and Treasury bonds to encourage investment and
bolster a weak economic recovery.
"Overall, we expect the Fed to maintain its stance on asset
purchases and forward guidance. At the press conference, we
expect the chairman to continue to downplay the costs of asset
purchases while highlighting the benefits," analysts at Barclays
Capital wrote in a client note.
"With the Fed having shifted to unemployment rate-based
guidance, the chairman's views on the overall labour market
conditions, which take into account a broader set of indicators,
would be parsed."