Aussie & NZD underperform euro after Cyprus aid deal

* AUD & NZD lose ground vs EUR, off 3-1/2 mth highs

* Australasian currencies outperform USD & yen

* Cyprus deal helps underpin risk appetite, bonds fall

(Updates to late local trade) By Ian Chua and Naomi Tajitsu

SYDNEY/WELLINGTON, March 25 (Reuters) - The Australian and New Zealand dollars lost ground against a broadly firmer euro on Monday after Cyprus secured a financial bailout that will help prevent a collapse of its banking system.

The news was positive for risk assets and saw the Australasian currencies outperform the dollar and yen. But the biggest gainer was the euro, which rose more than 0.5 percent at one stage to A$1.2490 . Against the kiwi, it climbed roughly 0.5 percent to NZ$1.5624 .

Late in the local session, the euro was at A$1.2475 and NZ$1.5619, well off 3-1/2 month lows around A$1.2335 and NZ$1.5445 plumbed last week.

Analysts warned further gains in the euro may be limited.

"After the initial bounce in the euro on the deal, it may well begin to slide as the market now worries about what will happen when Cyprus banks reopen for business," said Greg Gibbs, senior currency strategist at RBS.

"Striking workers could delay this, and we may yet see the spectre of an attempted bank run. We see little sustained upside in the euro on this deal."

For now, global investors cheered the plan that has spared the east Mediterranean island a financial meltdown and a possible exit from the euro zone.

The improved risk appetite saw local government bonds come under pressure and gave the Australasian currencies an edge against the low-yielding yen and U.S. dollar.

The Aussie was last up 0.1 percent at $1.0449, having earlier touched a 7-1/2 week high of $1.0462. Resistance is found around $1.0475, the Jan. 30 high, with a break above targeting $1.0550.

The kiwi crept up to $0.8362 , matching a one-month high hit on Friday.

"NZD demand has been almost unwavering despite events in Europe," ANZ analysts said in a note. "This is testament to the ongoing focus on NZ's attractive yield, as evidenced by strong (government bond) tender demand."

A surprisingly strong domestic GDP reading last week continued to underpin the kiwi as it raised speculation that New Zealand's interest rates, which are already higher than many other countries at 2.5 percent, may rise sometime this year.

The analysts added that the kiwi was hovering around a key technical pivot at 0.8350-80, which contains trendline support drawn from lows hit in August and December. A break above that could see a retest of the mid-$0.8400 region, they said.

Against the yen, the Aussie rose 0.4 percent to 99.05

while kiwi also gained 0.4 percent to 79.15 , not far off multi-year peaks of 99.99 and 79.91 set recently.

Australian government bonds eased, with the three-year futures contract 0.08 points lower at 96.920, while the 10-year contract fell 0.07 points to 96.365.

New Zealand government bonds slipped, pushing yields six basis points higher at the long end of the curve. (Editing by Eric Meijer)

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Keywords: MARKETS AUSTRALIA NEWZEALAND/FOREX