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Asia mixed; Nikkei reverses course on relatively weaker yen

Asia markets ended mixed on Friday, with the Japanese benchmark index reversing losses on the back of a relatively weaker yen.

The Nikkei 225 closed up 71.68 points, or 0.46 percent, at 15,821.52, reversing losses of over 1 percent after Japanese Finance Minister Taro Aso said the government would take steps as needed to arrest the yen's climb. Despite the late bounce, the index still lost over 2 percent for the week.

Across the Korean Strait, the Kospi finished near flat at 1,972.05. Down Under, the ASX 200 closed down 26.47 points, or 0.53 percent, at 4,937.60. Hong Kong's Hang Seng index reversed losses to close up 104.35 points, or 0.51 percent, at 20,370.40.

Chinese mainland markets were lower, with the Shanghai composite closing down 22.66 points, or 0.75 percent, at 2,985.75 and the Shenzhen composite losing 15.94 points, or 0.82 percent, to 1,914.32.

Alarm bells on yen?

The dollar/yen pair saw slight recovery Friday afternoon, trading at 108.73 as of 2:43 p.m. HK/SIN time. This was compared to the pair falling as low as 107.67 overnight, near the lowest level for the pair since October 2014.

Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said that the yen's appreciation spelled big trouble for Japan's businesses and economy.

"Alarms should be ringing at the Ministry of Finance and Bank of Japan," she said in a morning note, before the Japanese finance minister's comments. "However, everything that we have heard from the Japanese government so far suggests that they are not ready to intervene in the foreign exchange market to lower the value of their currency."

Lien added that it was becoming clear that the Japanese central bank "could allow dollar/yen to fall to 105 and maybe even 100 before taking action."

Major Japanese exporters reversed morning losses, taking cues from the yen's relative weakness to the dollar Friday. A stronger yen is a negative for exporters as it affects their overseas profits when converted into local currency.

Shares of Toyota closed up 0.79 percent, Honda up 1.07 percent and Sony adding 1.37 percent. Nissan shares finished up 2.35 percent.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
---
ASX 200
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SHANGHAI
---
KOSPI
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CNBC 100
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Elsewhere, the dollar index, which measures the U.S. dollar against a basket of currencies, advanced 0.18 percent to 94.65 as of 3:12 p.m. HK/SIN time.

Down Under, the Australian dollar traded at $0.7536 in the evening local time, after trading as high as $0.7637 on Thursday.

The Chinese yuan was weaker against the dollar on Friday, with the dollar/yuan pair trading up 0.3 percent at 6.4796.

Before market open, the People's Bank of China set the yuan mid-point at 6.4733 to the dollar. China's central bank lets the yuan spot rate rise or fall a maximum of 2 percent against the dollar relative to the official fixing rate.

A pedestrian looks at a share prices board of the Tokyo Stock Exchange in Tokyo, Japan.
Kazuhiro Nogi | AFP | Getty Images
A pedestrian looks at a share prices board of the Tokyo Stock Exchange in Tokyo, Japan.

Data released on Thursday showed China's foreign exchange reserves rose slightly in March to $3.21 trillion, compared to a Reuters poll forecast of a drop to $3.18 trillion and a print of $3.20 trillion in February. This was the first monthly increase since November, but reserves are still down sharply from their peak of $3.99 trillion in June 2014, said Reuters.

Cynthia Kalasopatan from Mizuho Bank said in a note several factors could have led to the uptick in China's foreign exchange reserves, including "less pronounced capital outflows," "valuation effects" and "reduction in repayment of external loss."

But Kalasopatan cautioned, "It is important to note that despite a rise in FX reserves, capital outflows may still be taking place; valuation effects may have outweighed capital outflow effect."

She added recent yuan stability suggests that "the Chinese authorities are focused in containing volatility."

Fast Retailing shares drop 12.7%

Shares of the Japanese retailer Fast Retailing slumped 12.73 percent, after the company trimmed its profit outlook on Thursday. Reuters reported that Fast Retailing's quarterly profits were hurt by price cuts at its clothing chain Uniqlo.

In its fiscal second quarter through February, Fast Retailing reported an operating profit of 23.4 billion yen ($215 million), down from 58.7 billion in the same period a year ago, and said it expected operating profit for the full year through end-August to be at 120 billion yen compared to a previous outlook of 180 billion yen in January, said Reuters.

Oil prices advanced during Asian hours, with U.S. crude futures trading up 2.36 percent at $38.14 a barrel, while Brent futures added 1.83 percent to $40.15 as of 3:14 p.m. HK/SIN time.

Overnight oil prices retreated after data showed higher weekly inventories at the U.S. crude storage base. Reuters said market intelligence firm Genscape reported a build of 255,804 barrels at the Cushing, Oklahoma, delivery hub for U.S. crude futures in the week to Tuesday.

Energy plays in Asia were mixed, with shares of Santos retracing losses to close up 0.26 percent, Oil Search was higher by 0.31 percent and Inpex adding 1.39 percent. Chinese mainland energy stocks closed mostly lower, with Sinopec off 3.83 percent.

Major stock indexes in the U.S. closed down, with the Dow Jones industrial average off 0.98 percent, the S&P 500 finishing down 1.2 percent and the Nasdaq composite 1.47 percent lower.

"It's been a distinctly 'risk-off' night," said Ray Attrill, global co-head of foreign exchange strategy at the National Australia Bank, in a morning note, adding financial stocks took a beating overnight.

"Increased dissolution about what central policies will continue to do to financial sector profitability may be a factor here," he said, adding, "as too investors bracing for the Q1 earnings season (that kicks off in earnest on Monday) and where the banks are anticipated to reveal a truly rotten start to the year."

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