Asia Markets

Asia markets close mostly lower as euro clings to 2-year highs, Aussie dollar stumbles

Key Points
  • The euro surged to its highest levels since August 2015 after comments from European Central Bank President Mario Draghi on Thursday
  • The Australian dollar stumbled on comments from a top central banker that interest rates in the country did not automatically need to be raised just because other central banks had done so
  • Shares of Hong Kong-listed Sunac, Guangzhou R&F and Wanda Hotel Development traded lower after surging as high 15 percent in the previous session

Asia markets closed mostly lower after a subdued session on Friday as the euro traded close to two-year highs on Thursday comments from the chief of the European Central Bank and the Australian dollar stumbled.

The slid 0.22 percent, or 44.84 points, to close at 20,099.75. South Korea's benchmark Kospi reversed earlier losses to close up 0.34 percent, or 8.22 points, at 2,450.06.

Over in Australia, the S&P/ASX 200 traded down 0.67 percent, or 38.653 points, to end at 5,722.8 on broad-based declines across most sub-indexes. The heavily-weighted financials sub-index was down 0.71 percent after two straight days of gains. Meanwhile, the energy and materials sub-indexes declined 1.07 percent and 1.36 percent respectively.

Hong Kong's declined 0.16 percent by 3:02 p.m. HK/SIN, edging lower after nine consecutive days of gains. The slipped 0.21 percent, or 6.7066 points, to finish the session at 3,238.1581 and the Shenzhen Composite edged down 0.117 percent, or 2.1599 points, to close at 1,845.8141.

The ECB announced Thursday it was holding interest rates and asset purchases steady. The central bank's president, Mario Draghi, said at a conference later in the day that discussions about potential changes to the central bank's quantitative easing (QE) program should take place in the fall. No fixed time frame was set for when those discussions would begin.

The euro, which initially edged down after the ECB's decision, spiked to trade at two-year highs on the back of of Draghi's comments to trade above the $1.16 level. The common currency traded at $1.1670 at 2:51 p.m. HK/SIN — its highest levels since August 2015, according to Reuters data.

Meanwhile, political headlines out of the U.S. overnight put pressure on the dollar. Special Counsel Robert Mueller was looking into transactions involving President Donald Trump and people linked to him, Bloomberg reported.

The dollar index stood at 94.150 at 2:53 p.m. HK/SIN compared to a high of 95.167 seen in the overnight session. The greenback also softened against Japan's currency to fetch 111.74 yen compared to levels around the 112 handle seen earlier this week.

The dollar had taken a tumble on Tuesday on headlines related to stalled health care reforms in the U.S.

"This revelation is huge as just last week, President Trump said that expanding the investigation beyond Russia would be out of bounds. So with Mueller broadening the inquisition into Trump's business dealings, U.S. political risk could move to whole new levels as this foxtrot plays out," OANDA senior trader Stephen Innes said in a note.

In individual stocks, shares of LG Chem closed up 0.92 percent, after rising more than 2 percent earlier in the session, following Korean media reports that the company had been chosen as the exclusive battery supplier for the Apple iPhone 9. This is reportedly the first time Apple has diverged from its multi-vendor policy and chosen a single supplier for an iPhone component.

In Hong Kong, shares of Power Assets rallied 10.63 percent following news the company was declaring a special dividend of 7.50 Hong Kong dollars ($0.96) a share in addition to the interim dividend of 0.77 Hong Kong dollars ($0.10).

Meanwhile, Hong Kong property stocks were mixed. Shares of Sunac China Holdings reversed earlier gains to trader lower after soaring in the previous session. Sunac shed 0.31 percent. Guangzhou R&F and Wanda Hotel Development were down 1.01 percent and 6.1 percent respectively.

Nomura increased its target price for Sunac to 25.50 Hong Kong dollars ($3.27) from 19.64 Hong Kong dollars ($2.51) after changes were made in an asset acquisition deal involving Dalian Wanda. Nomura retained its "buy" call on Sunac shares.

"We are more positive on the new deal than the previous one as Sunac will not buy hotels but focus on its core property development business," Nomura analysts Elly Chen and Chloe Liu said in the July 20 note. While there was likely to be headwinds facing the company in the short term, property demand in the medium term was likely to be sustainable, they added.

In currencies, the People's Bank of China fixed the yuan reference point at its strongest level since October last year, Reuters said. The yuan mid-point stood at 6.7415 to the dollar on Friday, compared with Thursday's close of 6.7580.

The on-shore yuan traded at 6.7629 to the dollar at 2:56 p.m. HK/SIN. The PBOC lets the yuan spot rate rise or fall a maximum of 2 percent against the greenback, relative to the official fixing rate. The offshore yuan was a tad firmer at 6.7562.

Meanwhile, the Australian dollar was down a leg after a speech by Reserve Bank of Australia Deputy Governor Guy Debelle on Friday. Debelle said there was no automatic reason for the central bank to raise interest rates in Australia just because other central banks were doing so.

The Aussie dollar fell around 1 percent to trade as low as $0.7873 on the back of those comments, compared to a high of $0.7959 seen earlier in the session. The currency later recouped some of its losses to trade at $0.7912 at 2:57 p.m. HK/SIN.

On the energy front, oil prices traded slightly higher. Brent crude rose 0.2 percent to trade at $49.40 a barrel and U.S. West Texas Intermediate crude advanced 0.15 percent to trade at $46.99.

On Wall Street, major indexes closed mixed on Thursday after hitting record levels earlier in the trading session.

— CNBC's Leslie Shaffer contributed to this report.