Euro, Asian Shares Rise On Draft Cyprus Deal

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The euro and Asian shares rose on Monday after EU sources said Cyprus's president and the European Union have agreed the outlines of a rescue deal to avert financial meltdown on the Mediterranean island.

* MSCI Asia ex-Japan rises 0.5 pct, Nikkei opens up 1.4 pct

* Euro jumps away from last week's 4-month low vs dollar

The euro and Asian shares rose on Monday after EU sources said Cyprus's president and the European Union have agreed the outlines of a rescue deal to avert financial meltdown on the Mediterranean island.

The EU sources said the outlines include the creation of a "good bank" and a "bad bank" and the shutting down of Cyprus's second largest lender, and were agreed by Cypriot President Nicos Anastasiades in negotiation with European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso.

The plan will now be presented to euro zone finance ministers for discussion, the officials said.

The euro rose to $1.3050 from around $1.2980, moving away from a four-month low of $1.2844 hit on Tuesday.

Spot gold fell 0.3 percent to $1,603.81 an ounce as the euro advanced.

"The news was what markets were waiting for, some kind of an agreement. But uncertainties remain as it is still subject to further discussions," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

Saito said the euro also drew support from repatriations by Europeans ahead of the end of the first quarter, potentially positioning the common currency to hit $1.3100.

The MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.5 percent, after nearing its lowest level in three months struck earlier last week on Friday.

S&P 500 stock index futures were up 0.3 percent as trading resumed, while S&P E-mini futures were also 0.3 percent higher.

The European Union gave Cyprus until Monday to raise the 5.8 billion euros it needs to secure an international lifeline. Without the aid, the European Central Bank will cut funds to Cypriot banks and the country may be forced to exit the euro.

Failure to clinch a deal could cause a wider financial market selloff, but some analysts say contagion would be limited given that Cyprus accounts for just 0.2 percent of the euro zone's economic output. European financial markets have traded in relative calm since the Cyprus crisis erupted.

"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 RBS in Singapore.

Australian shares extended gains after the Cyprus news, on top of support from bargain hunters following last week's fall and a recovery in iron ore prices.

South Korean shares opened 1 percent higher, after closing the previous week at a 5-week low.

Japan's Nikkei stock average opened up 1.4 percent after tumbling 2.4 percent on Friday.

The dollar was up 0.4 percent at 94.83 yen, after hitting a low of 94.195 on Friday. Against a basket of key currencies, the U.S. currency was down 0.6 percent.

U.S. crude futures edged up 0.2 percent to $93.93 a barrel.

Market sentiment on Friday was partially lifted when hopes rose that Italy could end the political deadlock left by last month's inconclusive elections after President Giorgio Napolitano asked centre-left leader Pier Luigi Bersani to assess whether he can win enough support in Italy's divided parliament to form a government.

Also on Friday, Greece's Piraeus Bank struck a deal to take over the Greek branches of Cyprus's troubled banks, helping to shield Greek banks from the island's crisis and allowing Cyprus to shrink its bloated banking sector. The deal is subject to approval by European competition authorities.

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