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| Version 1 | Version 2 |
|---|---|
| Asian markets fall amid fears over Cyprus bailout deal | Asian markets fall amid fears over Cyprus bailout deal |
| (about 1 hour later) | |
| Asian markets have dipped after Cyprus bailout plans triggered fears of an escalation of the eurozone debt crisis. | Asian markets have dipped after Cyprus bailout plans triggered fears of an escalation of the eurozone debt crisis. |
| The EU and IMF want all bank customers to pay a levy in return for a bailout worth 10bn euros ($13bn; £8.6bn). | The EU and IMF want all bank customers to pay a levy in return for a bailout worth 10bn euros ($13bn; £8.6bn). |
| The plan is yet to be finalised, but the news of the deal caused a rush to the cash machines in Cyprus as people tried to withdraw money. | |
| Japan's Nikkei 225 index and Hong Kong's Hang Seng fell 2%, while Australia's ASX 200 dipped 1.4%. | |
| Analysts said that investors were sceptical about how the developments in Cyprus may affect other bigger eurozone economies which may also need bailout funds in the future. | Analysts said that investors were sceptical about how the developments in Cyprus may affect other bigger eurozone economies which may also need bailout funds in the future. |
| The big fear being that, if approved, the plan may set a precedence for those countries. | The big fear being that, if approved, the plan may set a precedence for those countries. |
| "There will certainly be confusion in Cyprus and investors looking just at headlines may fret about its case becoming a model," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. | "There will certainly be confusion in Cyprus and investors looking just at headlines may fret about its case becoming a model," said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. |
| 'Risk aversion' | 'Risk aversion' |
| The developments in Cyprus also had an impact on the currency markets. | The developments in Cyprus also had an impact on the currency markets. |
| The euro fell nearly 3% against the the Japanese yen. It was trading as low as 121.58 yen to the euro in Asian trade on Monday, down from 124.93 yen on Friday in New York. | The euro fell nearly 3% against the the Japanese yen. It was trading as low as 121.58 yen to the euro in Asian trade on Monday, down from 124.93 yen on Friday in New York. |
| The single currency also dipped to a three-month low against the US dollar. It was trading at $1.2895, down from late Friday's level of around $1.30. | |
| Meanwhile, the Japanese currency, considered by many as a safe haven asset in times of uncertainty, also gained against the US dollar. | Meanwhile, the Japanese currency, considered by many as a safe haven asset in times of uncertainty, also gained against the US dollar. |
| It rose as high as 93.45 yen against the US dollar on Monday, from 96.11 yen on Friday. | It rose as high as 93.45 yen against the US dollar on Monday, from 96.11 yen on Friday. |
| Analysts said the fresh concerns over eurozone debt crisis, triggered by the developments in Cyprus, had resulted in investors looking to ditch relatively riskier assets. | Analysts said the fresh concerns over eurozone debt crisis, triggered by the developments in Cyprus, had resulted in investors looking to ditch relatively riskier assets. |
| "The week has started with a clear rise in risk aversion, following the surprise weekend decision in Brussels to slug all depositors in Cypriot banks with a levy in order to approve euro 10bn bailout funds," said Sean Callow, a senior currency strategist at Westpac. | "The week has started with a clear rise in risk aversion, following the surprise weekend decision in Brussels to slug all depositors in Cypriot banks with a levy in order to approve euro 10bn bailout funds," said Sean Callow, a senior currency strategist at Westpac. |
| At the same time, analysts said, the rise in the yen's value - which makes Japanese exports more expensive and also hurts profits of exporters - was also hurting investor morale in Tokyo. | |
| "The yen is back to 95 to the dollar. This is bad news for the Japanese market," said Takashi Hiroki, chief strategist at Monex Inc. | |
| No Contagion | |
| This is the first time the 17-nation eurozone has sanctioned dipping into people's savings to finance a bailout. | |
| Under the levy, bank customers with less than 100,000 euros would have to pay 6.75%, those with more than 100,000 euros would pay 9.9%. | |
| However, depositors in Cypriot banks outside the country, including in Greece, are unaffected by the levy. | |
| But the plan is yet to finalised and Cyprus's leaders have said they want to ensure protection for small investors. | |
| Meanwhile, an emergency session of parliament has been postponed until Monday. | |
| Also, Germany must approve the plan but is not due to vote until next month. | |
| Analysts said that while there had been a rush to withdraw cash in Cyprus, the developments were unlikely to result in a contagion effect and cause large scale cash withdrawals in other eurozone countries. | |
| "I doubt that the case in Cyprus will trigger contagion risks across the eurozone, as the size of the country is too small and its industrial structure is very different from other eurozone members, in that Cyprus is dependent on just tourism and the financials sector," said Credit Agricole's Mr Saito. | |
| Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics, said the fact that negotiators from the European Central Bank and European Union were prepared to see depositors tapped for money suggested they were confident there would not be a bank run elsewhere. | |
| And in a research note published on Sunday, analysts at Barclays said: "We consider the likelihood of a bank run in other periphery countries to be limited, including in Greece." | |
| 'Bad precedent' | |
| However, MEP Sharon Bowles, who chairs the European Parliament's Economic and Monetary Affairs Committee, said a panic reaction in some of the eurozone's peripheral countries could not be discounted. | |
| She told the BBC that making savers share the burden set "a very bad precedent". | |
| Annalisa Piazza, of Newedge Strategy, was also concerned about the fallout. | |
| "The unprecedented move is an extreme measure, and in our view it will spread some panic... we cannot rule out some capital outflows," she said. | |
| "In the short-run we expect some effects on periphery's [bond yield] spreads and some weakening of the euro cannot be ruled out." | |
| Following eurozone finance ministers' negotiations last week, Cyprus became the fifth euro area country to get a bailout to save its banks, which suffered significant losses because of their exposure to Greek debt. |