TOKYO: The euro rallied in Asia on Monday after eurozone finance ministers agreed on a bailout for Cyprus as the island nation faced a looming deadline to clinch the 10-billion-euro rescue package.

Final backing for the deal came after 12 hours of 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.

“Overall, the deal was received positively by the market as, at the very least, it avoids a full-blown collapse of Nicosia's banking sector,” said Chris Tedder, a research analyst at Forex.com in Sydney.

In afternoon Tokyo trade, the euro fetched $1.3038 and 123.61 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 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 new deal was a retreat from last week's proposal to hit all savers with a one-off tax on their accounts, regardless of their bank or wealth.

Under the new deal 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.

In other forex trade Monday, the dollar was stronger at 94.79 yen in Tokyo from 94.46 yen in New York.

The greenback was mostly lower against other currencies, slipping to Sg$1.2443 from Sg$1.2494 on Friday, to 1,111 South Korean won from 1,117 won, and to 40.81 Philippine pesos from 40.83 pesos.

The greenback also weakened to 54.12 Indian rupees from 54.28 rupees and 9,736 Indonesian rupiah from 9,755 rupiah while it strengthened to 29.25 Thai baht from 29.23 baht. It was flat Tw$29.84.

The Australian dollar firmed to $1.0450 from $1.0425 while the Chinese yuan fetched 15.42 yen against 15.26 yen.