TOKYO - The euro rallied in Asian trade on Monday after eurozone finance ministers agreed on a 10-billion-euro (S$16.2 billion) bailout for Cyprus as the island nation faced a looming deadline to clinch the rescue package.
Final backing for the deal came after 12 hours into marathon talks between Cypriot President Nicos Anastasiades and the European Union, European Central Bank and International Monetary Fund.
The ECB had threatened to yank emergency funding to the country's lenders if Nicosia failed to agree on a bailout by Monday, raising fears of a banking crisis that threatened to further erode confidence in the troubled eurozone.
In morning Tokyo trade, the euro fetched $1.3044 and 123.79 yen, strengthening from $1.2986 and 122.72 yen late Friday in New York.
Last week, the euro took a drubbing as traders sold off the embattled unit on fears about Cyprus, which faced a huge public backlash against terms of an initial bailout deal that would have slapped a tax on all personal bank savings.
Markets feared that failure to reach a deal could see the tiny Mediterranean country exit the 17-nation eurozone with the fallout spilling over the borders into other troubled bloc members including Italy and Spain.
The agreement early Monday involves breaking up the island's second-biggest lender Laiki (Popular Bank).
And the Bank of Cyprus, the island's number one, will take a major "haircut" on all deposits of more than 100,000 euros.
The Bank of Cyprus, with one third of all holdings, survives, with the new deal backing off from last week's collapsed agreement to hit all savers in all banks on the island, terms that set off huge public protests.
Smaller account-holders will be covered by the EU's deposit guarantee legislation, which runs to the 100,000-euro threshold. Accounts above that level face big losses.
A major sticking-point throughout the talks was the ECB's demand for the Bank of Cyprus to pay a nine-billion-euro Laiki bill due to Frankfurt, which appeared to have been accepted.
In other forex trade Monday, the dollar was stronger at 94.91 yen in Tokyo from 94.46 yen in New York.