Asia markets lower in thinned trade, euro hit by Draghi comments

Hong Kong - Tokyo led losses in holiday-thinned Asian trade on Tuesday, with dealers keeping tabs on a developing scandal around Donald Trump's administration.

The Washington Post said Friday that Trump's son-in-law and close advisor Jared Kushner had met the Russian ambassador prior to the inauguration and proposed a secret communications link to the Kremlin.

The talks, if confirmed, would raise new questions about the White House's relationship with Moscow, which US intelligence agencies say could have helped the tycoon win November's election.

There are fears the budding crisis, along with several other scandals enveloping the administration, could prevent Trump from pushing through his market-friendly economic policies.

Okasan Online Securities said in a commentary: "With President Trump returning home from a trip abroad, media reporting on 'Russiagate' will also pick up."

There were few catalysts to drive business, with Wall Street and London closed Monday for public holidays, while Hong Kong and Shanghai were closed on Tuesday.

Tokyo ended the morning session 0.5% lower, Sydney and Singapore each shed 0.3% and Seoul gave up 0.7%.

The euro came under pressure following comments from the head of the European Central Bank suggesting it will stick to its loose monetary policy for now, disappointing those who had hoped for some form of tightening at its June meeting.

Mario Draghi said the ECB was "firmly convinced" it must maintain its interventions in the eurozone economy to avoid undermining a gathering recovery.

The bank's interest rates are at historic lows, while the ECB buys tens of billions of euros in bonds each month to pump cash into the financial system.

Stephen Innes, senior trader at OANDA, said in a note: "The euro was trading a tad dark as Draghi's latest comments suggest the EU still needs stimulus, sounding much less hawkish than the market lean."

The pound was also struggling as Prime Minister Theresa May's ruling Conservatives saw their opinion poll lead narrow further against the opposition Labour Party.

Sterling had soared in recent weeks on the prospect May would win a landslide in the June 8 poll, giving her a stronger hand in Brexit talks. But the currency has fallen with the government's poll numbers on fears Britain could end up with a bad EU exit deal.

Attention will be on the release on Friday of US jobs data, which will give investors a better handle on the Federal Reserve's plans for raising interest rates, with its next policy meeting later this month.