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Euro rebounds on hopes of Cyprus deal

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(Globalpost/GlobalPost)

The euro pulled up against the dollar Friday amid expectations that an EU-IMF rescue deal for Cyprus would be formulated this weekend to avoid a meltdown of the country's banks next week.

The euro picked up nearly one cent from Thursday's rout to trade, at 2100 GMT, at $1.2986.

The euro added slightly on the yen, to 122.72 yen from 122.34 yen, while the dollar was lower on the Japanese currency, at 94.46 yen from 94.86 yen.

After three days pushing further into crisis, with its banking sector and economy at risk of implosion if it could not seal a rescue deal, Cyprus appeared late Friday headed back into the rough embrace of the European Union and International Monetary Fund for a bailout.

That gave traders more confidence that the Mediterranean island nation would not be forced from the eurozone and, more importantly, its deep problems would not spill over the borders into other troubled eurozone countries like Italy and Spain.

"People are fairly confident that some deal will be closed by Sunday evening," said David Gilmore, an analyst at FXA Analytics.

"A deal would involve a massive restructuring of the banking system."

David Song of DailyFX predicted that "as the EU moves into top gear to rescue Cyprus, positive headlines may prop up the single currency going into the end of the week.

"But we may see a major gap at the Sunday open should the periphery country fail to address the banking crisis."

The British pound gained more ground on the dollar, pushing to $1.5233 from $1.5171, and the dollar slipped to 0.9401 Swiss francs from 0.9465 francs.

pmh/oh

http://www.globalpost.com/dispatch/news/afp/130322/euro-rebounds-hopes-cyprus-deal