* Cyprus rejects bailout terms; last minute deal hopes still
* Asian shares extend decline, close to wiping out 2013
* Euro down versus dollar & yen
* BOJ governor, Fed meeting outcome also in focus
* Japanese markets closed for holiday
By Ian Chua
SYDNEY, March 20 (Reuters) - Asian shares extended losses on
Wednesday and investors gave the euro a wide berth after a
bailout deal for Cyprus was thrown into disarray.
Cyprus's parliament overwhelmingly rejected a proposed tax
on bank deposits as a condition for bailout aid, pushing the
Mediterranean island a step closer to the brink of financial
The European Central Bank offered some comfort by saying it
was committed to providing liquidity within certain limits, even
after having threatened to end emergency lending assistance for
teetering Cypriot banks.
"It seems like you're going to have a run of negative press
over the next few days at least. So until this plays out and
until that cloud is dealt with, it's going to be hard to get too
optimistic on the outlook in the near term," said Michael
Turner, strategist at RBC in Sydney.
The MSCI's broadest index of Asia-Pacific shares outside
Japan shed 0.3 percent, extending a 1.7 percent
slide on Tuesday. The index is now down around 3 percent from
its 2013 peak set a month ago.
South Korean shares lost 0.3 percent, while their
Australian counterparts fell 0.4 percent. Japanese
financial markets had a reprieve thanks to a public holiday
The declines in Asian bourses came as Wall Street's S&P 500
index closed lower for a third day, while the Dow Jones
industrial average ended flat after recouping early
Traders said there was no panic in markets because investors
are hopeful that the European Union, as so often before, will
hash out a last minute deal that keeps Cyprus in the common
"We do not believe that the move by the Cypriot parliament
should be seen as the ultimate 'no' vote to the bailout," said
Vassili Serebriakov, a strategist at BNP Paribas based in New
"Banks in Cyprus are closed until Thursday and we expect a
new deal to emerge over the next 24 hours. The failure to
ultimately pass a deal would clearly lead to very negative
scenarios, possibly involving the question of euro zone
Uncertainty surrounding Cyprus kept the euro pinned at
four-month lows against the U.S. dollar. The euro fetched
$1.2866, having fallen as far as $1.2844 overnight.
Against the yen, it was down 0.3 percent at 122.26 yen
, near a two-week low of 121.45 plumbed Monday.
Yet markets will also be wary of any comments from Haruhiko
Kuroda, who becomes governor of the Bank of Japan on Wednesday.
Expectations that Kuroda will quickly embark on a much more
aggressive monetary policy to fight deflation have recently
pushed the yen to multi-year lows versus the euro and dollar.
The dollar index, which tracks the greenback's
performance against a basket of currencies, was a tad firmer at
83.048, not far from a seven-month peak of 83.166 set a few days
Investors will also keep an eye on the outcome of the
Federal Reserve's two-day policy meeting due to end later on
Analysts expect the Fed to keep buying $85 billion a month
in mortgage and Treasury bonds in to encourage investment and
bolster a weak economic recovery.
"Overall, we expect the Fed to maintain its stance on asset
purchases and forward guidance. At the press conference, we
expect the chairman to continue to downplay the costs of asset
purchases while highlighting the benefits," analysts at Barclays
Capital wrote in a client note.
"With the Fed having shifted to unemployment rate-based
guidance, the chairman's views on the overall labour market
conditions, which take into account a broader set of indicators,
would be parsed."