Asia report: Weaker dollar pushes markets lower

Markets in Asia finished lower on Thursday, with a weaker dollar dragging on Japanese shares and stocks in South Korea failing to ignite after a surprise interest rate cut.

Japan’s Nikkei 225 broke its two-session streak to finish down 0.97% at 16,668.41, with the weaker greenback the main catalyst.

Yen was last trading 0.53% stronger at JPY 106.42 per USD.

“The inability of dollar-yen to stop falling during Tokyo market hours clearly reflects domestic flow dynamics behind the yen strength,” notes analysts at Bank of America-Merrill Lynch.

Major exporters were mostly down as the yen surged, with Toyota losing 1.37%, Nissan down 2.5% and Sony off by 1.38%.

Data released by the Cabinet office in Tokyo earlier in the session suggested business investment in the economy was shrinking.

Core machinery orders for April - excluding orders from ships and electricity companies - decreased by 11% on a seasonally-adjusted basis against the prior month.

A Reuters poll of economists had the decline forecast at 3.8%.

In Seoul, the Kospi finished down 0.14% at 2,024,17, despite trading as high as 2,035.27 after the rate cut announcement.

The Bank of Korea surprised the markets with its announcement, cutting interest rates by 25 basis points to a record low of 1.25%.

Analysts polled by Reuters had expected the central bank to stand pat on its rate, holding at 1.5%.

The won weakened against the dollar after the decision, though it did claw back after local markets closed and was last ahead by 0.08% at KRW 1,155.89.

“Concerns about the downside risks corporate restructuring will pose to the economy were likely a factor in the BoK’s decision to act today,” noted Capital Economics economist Krystal Tan.

The surprise move came after an announcement on Wednesday that the South Korean finance minister and the central bank were creating a KRW 11trn fund to support two state-run banks, highly exposed to the embattled shipbuilding industry that’s currently being restructured.

Markets in China, Hong Kong and Taiwan were closed as traders swapped their brogues for boat shoes, for the Dragon Boat Festival.

Oil prices remained above the key $50 mark during Asian trading, but continued to lose some ground as Europe took the baton.

Brent crude was last d0en 1% at $51.99 per barrel and West Texas Intermediate had lost 0.87% at $50.79.

Down under, the S&P/ASX 200 was chopping through the red and the green for much of the day, before settling down 0.15% at 5,361.93.

The major miners were all up, however, with BHP Billiton adding 0.36%, Fortescue Metals up 3.48% and Rio Tinto rising 0.6%.

In New Zealand, the S&P/NZX 50 closed down 0.3% to keep it below the key 7,000 mark, at 6,970.55.

Telecoms were the theme of the day on the corporate front, with the largest broadband and mobile provider Spark losing 5% as investors feared its market domination would be diluted by a competitor merger.

London-based conglomerate Vodafone revealed plans to the market during the day to combine its New Zealand operation with local subscription television service Sky (unrelated to the UK-based firm of the same name), in a deal that would give Vodafone 51% of the combined firm.

Sky and Vodafone have been cooperating since the latter acquired TelstraClear, giving it a cable network distributing Sky’s programming in a number of regions.

Earlier in the day, the Reserve Bank of New Zealand satiated the market with a decision to stand pat on interest rates, remaining at a record low 2.25%.

In the policy statement, the central bank said the decision was pushed by both a modest recovery in commodity prices and “financial stability concerns” over house price inflation in the largest city, Auckland, as well as other regions.

The RBNZ did not rule out further easing, as it might be needed to ensure future average inflation “settles near the middle of the target range” of 1% to 3%.

In spite of the hold decision and the potential of further easing, the Kiwi shot ahead and was last trading 1.14% ahead at NZD 1.4098 against the greenback.

The Aussie, meanwhile, was comparatively weaker at AUD 1.3464 per USD.