Reuters :
Action from Turkey’s central bank pushed the lira higher for a second day on Wednesday, helping European stocks and emerging currencies consolidate recent losses though the dollar stuck at 13-month highs kept up the pressure on world markets, Reuter’s reports from London.
The lira bounced another 5 per cent, sharply extending Tuesday’s gains as authorities further tightened the screws on foreigners aiming to short the currency. The lira is now around 6 per dollar, off record lows beyond 7.24 TRY=D3.
However, it started 2018 at 3.75 and the rebound follows a 36 per cent drop over the past month. Fear of full-blown crisis and debt defaults in the country of 80 million people is far from over as the central bank’s failure to tackle galloping inflation and Ankara’s diplomatic tiff with Washington keep investors wary.
“It has calmed down a bit, the reason is that the Turkish lira is appreciating and that is causing people to re-focus on country-specific fundamentals so the contagion effect naturally is less,” said Koon Chow a strategist at fund manager UBP.
He said however there had been little fundamental change to celebrate and added: “It’s only a temporary thing for Turkish markets, I’m not sure (volatility) is over.”
The Turkish worries have in recent days driven a capital exodus from across emerging markets, sending currencies from the Argentine peso to the Indian rupee to record lows, while emerging equities .MSCIEF have tumbled almost 20 per cent from January highs.
There are also concerns about China’s slowing economy – reinforced by this week’s data on investment and industrial output – and the yuan’s weakening to 15-month lows against the dollar is also pressuring other Asian markets. Indonesia, acting after the rupiah fell to three-year lows, raised interest rates for the fourth time since May
European shares opened flat, though liquidity was severely thinned by a holiday in many countries.
Earlier, Asian shares excluding Japan .MIAPJ0000PUS slid more than 1 per cent to one-year lows while MSCI’s all-country equity benchmark was a quarter per cent lower .MIWD00000PUS. But it stayed off one-month lows reached on Monday.
Chinese shares .HSI .SSEC lost more than 1 per cent, pressured by signs the world’s second-largest economy is losing momentum amid a trade conflict with Washington. Japanese shares too dropped one per cent .N225.
US president Donald Trump has slapped hefty tariffs on a swathe of Chinese goods, prompting retaliation from Beijing.
Global trade tensions show little sign of easing, with Beijing now lodging a complaint to the World Trade Organisation to help determine the legality of U.S. tariff and subsidy policies.
Turkey too has raised tariffs on some U.S. products “in response to the U.S. administration’s deliberate attacks on our economy, vice president Fuat Oktay wrote on Twitter on Wednesday.
President Tayyip Erdogan has called a boycott on US electronic goods.
Jameel Ahmad, global head of currency strategy at FXTM brokerage said the escalation of tensions between the United States and Turkey reminded investors “it is not just the United States and China that stand at the heart of the global trade war concerns.”
Wall Street closed higher on Tuesday, continuing to draw support from forecast-beating company earnings but New York stocks appear set for a weaker opening, futures show.
The concerns have driven investors to embrace assets such as German and U.S. government bonds, the Japanese yen and Swiss franc, which are considered safer. German and U.S. 10-year yields are down more 10 bps this month DE10YT=RR US10YT=RR.
The other beneficiary has been the dollar. Already resurgent thanks to the high yield it offers, it has surged to 13-month peaks against a basket of currencies .DXY.
“In light of all the turmoil we’ve seen out of Turkey and the subsequent contagion into other emerging markets, the dollar is pretty much establishing itself as the safe-haven currency,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
“If you are going to park your money somewhere to stay away from the turmoil, the dollar is going to be the currency of choice.”
The strong dollar’s victims are of course emerging currencies – many of them remain under pressure despite the lira’s recent bounce. But the greenback’s rise has also pummelled euro and sterling.
The former has been hit also by jitters around euro zone banks’ exposure to Turkey EUR=EBS. The single currency slipped another 0.2 per cent to a new 13-month low versus the dollar and it also extended losses against the Swiss franc EURCHF=
Sterling meanwhile tumbled under $1.27 for the first time since June 2017, having lost ground for 11 days in a row, its longest losing streak since 2008 GBP=D3. The currency is being undermined by confusion around what trade deal it (the British government) will negotiate with the European Union ahead of Britain’s planned exit next year from the bloc.
However, gold XAU=, the other traditional safe haven, sank to 18-month lows, also hurt by dollar strength.
“The dollar will continue to be the safe-haven asset of preference. As a consequence, gold prices are really going to struggle,” said Daniel Hynes, an analyst at ANZ Bank.
Turkey crisis weighs on Asian shares
AFP reports from Singapore: Stocks were weaker in most major Asian markets Wednesday, with Turkey’s financial crisis showing little sign of abating as Ankara hiked tariffs on several US goods in a tit-for-tat move.
Following a day of gains on Tuesday, investors were again in a bearish mood, driving down markets in Tokyo, Hong Kong and Shanghai, but the Turkish lira was spared the freefall of recent sessions.
The main Japanese market, the Nikkei 225, erased early gains to close 0.68 per cent down on the day, giving back some of the ground made on Tuesday when it jumped by more than two per cent.
The Hang Seng in Hong Kong was off more than 1.5 per cent and the losses were even deeper in Shanghai, which was in the red by more than two per cent as disappointing economic data continued to weigh on the market.
The Turkish lira avoided the kind of dizzying drops seen in recent days but still experienced some frantic trading when Ankara announced a rise in tariffs for certain US imports.
Turkey’s vice president said the hikes were ordered “within the framework of reciprocity in retaliation for the conscious attacks on our economy by the US administration”, as the war of words between the two NATO allies intensified.
Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, said the Turkey crisis was likely to go on for some time.
“It is hard not to see the lira remaining under pressure until we see a material fiscal restraint to cool down the economy, along with a measurable lift in rates by the central bank and a diplomatic resolution to US tensions,” said the analyst.
The Turkish unit had been under pressure for weeks over growing concerns about the health of the economy but the currency slumped on Friday and Monday, when US President Donald Trump announced Washington was ramping up aluminium and steel tariffs.
In late Asian trading, the lira was at 6.2050 against the dollar, having recovered significantly from the record lows of 7.24 seen on Monday.
Traders fretted that Turkey’s woes could spark contagion into other emerging currencies and also that banks in advanced nations could suffer due to exposure to the Turkish economy. “While the lira is stabilising, investors are still concerned that the crisis will spread to other emerging economies and currencies,” said Hikaru Sato, senior technical analyst at Daiwa Securities. “Trading is expected to remain nervous for now.”
However, not all was doom and gloom in Asian markets, with Seoul’s Kospi and the main Australian market up around 0.5 per cent.
Dollar/Turkish lira: DOWN at 6.21 lira from 6.53 lira early Wednesday. Turkey hits back at US with tariff hikes on key products.
An AFP report from Istanbul says: Turkey on Wednesday said it was hiking tariffs on imports of several key US products in retaliation for American sanctions against Ankara, as a bitter dispute between the two allies that sent the Turkish lira into freefall showed no sign of ending.
Action from Turkey’s central bank pushed the lira higher for a second day on Wednesday, helping European stocks and emerging currencies consolidate recent losses though the dollar stuck at 13-month highs kept up the pressure on world markets, Reuter’s reports from London.
The lira bounced another 5 per cent, sharply extending Tuesday’s gains as authorities further tightened the screws on foreigners aiming to short the currency. The lira is now around 6 per dollar, off record lows beyond 7.24 TRY=D3.
However, it started 2018 at 3.75 and the rebound follows a 36 per cent drop over the past month. Fear of full-blown crisis and debt defaults in the country of 80 million people is far from over as the central bank’s failure to tackle galloping inflation and Ankara’s diplomatic tiff with Washington keep investors wary.
“It has calmed down a bit, the reason is that the Turkish lira is appreciating and that is causing people to re-focus on country-specific fundamentals so the contagion effect naturally is less,” said Koon Chow a strategist at fund manager UBP.
He said however there had been little fundamental change to celebrate and added: “It’s only a temporary thing for Turkish markets, I’m not sure (volatility) is over.”
The Turkish worries have in recent days driven a capital exodus from across emerging markets, sending currencies from the Argentine peso to the Indian rupee to record lows, while emerging equities .MSCIEF have tumbled almost 20 per cent from January highs.
There are also concerns about China’s slowing economy – reinforced by this week’s data on investment and industrial output – and the yuan’s weakening to 15-month lows against the dollar is also pressuring other Asian markets. Indonesia, acting after the rupiah fell to three-year lows, raised interest rates for the fourth time since May
European shares opened flat, though liquidity was severely thinned by a holiday in many countries.
Earlier, Asian shares excluding Japan .MIAPJ0000PUS slid more than 1 per cent to one-year lows while MSCI’s all-country equity benchmark was a quarter per cent lower .MIWD00000PUS. But it stayed off one-month lows reached on Monday.
Chinese shares .HSI .SSEC lost more than 1 per cent, pressured by signs the world’s second-largest economy is losing momentum amid a trade conflict with Washington. Japanese shares too dropped one per cent .N225.
US president Donald Trump has slapped hefty tariffs on a swathe of Chinese goods, prompting retaliation from Beijing.
Global trade tensions show little sign of easing, with Beijing now lodging a complaint to the World Trade Organisation to help determine the legality of U.S. tariff and subsidy policies.
Turkey too has raised tariffs on some U.S. products “in response to the U.S. administration’s deliberate attacks on our economy, vice president Fuat Oktay wrote on Twitter on Wednesday.
President Tayyip Erdogan has called a boycott on US electronic goods.
Jameel Ahmad, global head of currency strategy at FXTM brokerage said the escalation of tensions between the United States and Turkey reminded investors “it is not just the United States and China that stand at the heart of the global trade war concerns.”
Wall Street closed higher on Tuesday, continuing to draw support from forecast-beating company earnings but New York stocks appear set for a weaker opening, futures show.
The concerns have driven investors to embrace assets such as German and U.S. government bonds, the Japanese yen and Swiss franc, which are considered safer. German and U.S. 10-year yields are down more 10 bps this month DE10YT=RR US10YT=RR.
The other beneficiary has been the dollar. Already resurgent thanks to the high yield it offers, it has surged to 13-month peaks against a basket of currencies .DXY.
“In light of all the turmoil we’ve seen out of Turkey and the subsequent contagion into other emerging markets, the dollar is pretty much establishing itself as the safe-haven currency,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
“If you are going to park your money somewhere to stay away from the turmoil, the dollar is going to be the currency of choice.”
The strong dollar’s victims are of course emerging currencies – many of them remain under pressure despite the lira’s recent bounce. But the greenback’s rise has also pummelled euro and sterling.
The former has been hit also by jitters around euro zone banks’ exposure to Turkey EUR=EBS. The single currency slipped another 0.2 per cent to a new 13-month low versus the dollar and it also extended losses against the Swiss franc EURCHF=
Sterling meanwhile tumbled under $1.27 for the first time since June 2017, having lost ground for 11 days in a row, its longest losing streak since 2008 GBP=D3. The currency is being undermined by confusion around what trade deal it (the British government) will negotiate with the European Union ahead of Britain’s planned exit next year from the bloc.
However, gold XAU=, the other traditional safe haven, sank to 18-month lows, also hurt by dollar strength.
“The dollar will continue to be the safe-haven asset of preference. As a consequence, gold prices are really going to struggle,” said Daniel Hynes, an analyst at ANZ Bank.
Turkey crisis weighs on Asian shares
AFP reports from Singapore: Stocks were weaker in most major Asian markets Wednesday, with Turkey’s financial crisis showing little sign of abating as Ankara hiked tariffs on several US goods in a tit-for-tat move.
Following a day of gains on Tuesday, investors were again in a bearish mood, driving down markets in Tokyo, Hong Kong and Shanghai, but the Turkish lira was spared the freefall of recent sessions.
The main Japanese market, the Nikkei 225, erased early gains to close 0.68 per cent down on the day, giving back some of the ground made on Tuesday when it jumped by more than two per cent.
The Hang Seng in Hong Kong was off more than 1.5 per cent and the losses were even deeper in Shanghai, which was in the red by more than two per cent as disappointing economic data continued to weigh on the market.
The Turkish lira avoided the kind of dizzying drops seen in recent days but still experienced some frantic trading when Ankara announced a rise in tariffs for certain US imports.
Turkey’s vice president said the hikes were ordered “within the framework of reciprocity in retaliation for the conscious attacks on our economy by the US administration”, as the war of words between the two NATO allies intensified.
Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, said the Turkey crisis was likely to go on for some time.
“It is hard not to see the lira remaining under pressure until we see a material fiscal restraint to cool down the economy, along with a measurable lift in rates by the central bank and a diplomatic resolution to US tensions,” said the analyst.
The Turkish unit had been under pressure for weeks over growing concerns about the health of the economy but the currency slumped on Friday and Monday, when US President Donald Trump announced Washington was ramping up aluminium and steel tariffs.
In late Asian trading, the lira was at 6.2050 against the dollar, having recovered significantly from the record lows of 7.24 seen on Monday.
Traders fretted that Turkey’s woes could spark contagion into other emerging currencies and also that banks in advanced nations could suffer due to exposure to the Turkish economy. “While the lira is stabilising, investors are still concerned that the crisis will spread to other emerging economies and currencies,” said Hikaru Sato, senior technical analyst at Daiwa Securities. “Trading is expected to remain nervous for now.”
However, not all was doom and gloom in Asian markets, with Seoul’s Kospi and the main Australian market up around 0.5 per cent.
Dollar/Turkish lira: DOWN at 6.21 lira from 6.53 lira early Wednesday. Turkey hits back at US with tariff hikes on key products.
An AFP report from Istanbul says: Turkey on Wednesday said it was hiking tariffs on imports of several key US products in retaliation for American sanctions against Ankara, as a bitter dispute between the two allies that sent the Turkish lira into freefall showed no sign of ending.
