Asian markets were mixed in nervous trade on Friday after the European Central Bank warned Cyprus it would cut off funding to its banks if leaders did not hammer out a new bailout deal by next week.
Regional markets followed losses in Europe and on Wall Street as Nicosia struggles to find new ways to raise cash to qualify for bailout funds, after its plan to tax savings was overwhelmingly rejected on Tuesday.
Tokyo fell 1.50 per cent by the break as traders moved back into the safe-haven yen, mainly at the expense of the euro, while Hong Kong lost 0.22 per cent, although Sydney gained 0.36 per cent, Shanghai added 0.21 per cent and Seoul was 0.14 per cent higher.
Cypriot politicians have until Monday to approve a “Plan B” bailout deal with the European Union and International Monetary Fund or face being choked from ECB funds, which would likely cause the island’s banks to collapse.
Adding to pressure, an EU source said that unless Nicosia pushed a workable plan through parliament and restructured its banking sector by Tuesday it risked expulsion from the euro zone.
Global markets have this week largely been driven by the crisis in Cyprus after the government at the weekend unveiled a plan to tax deposits up to 10 per cent as part of a deal to qualify for a EU/IMF US$13 billion bailout.