| Translate This News In |
|---|
The Turkish lira hit a new low against the dollar after President Tayyip Erdogan shocked investors by replacing the hawkish central bank governor with a proponent of low-interest rates over the weekend.
On expectations that Japanese investors who have been buying the lira recently for its high rates would cut their losses and close out their positions, the yen rose against the euro and other antipodean currencies.
Because of its position as a safe-haven currency, concerns that developments in Turkey would threaten other financial markets boosted the dollar.
Masafumi Yamamoto, head of monetary policy for Mizuho Securities in Tokyo said, “There are other emerging markets not in the same place as Turkey, but some infection could still occur.”
“There are fears that people in other markets will start profiting. It looks like a time to re-think your investment strategy, so it will stop rotating into higher-income emerging markets.”
The Turkish lira stood at 80500 per dollar, down 10% on Friday.
At one point the lira has decreased to 8,4850, near a record low of 8,5800, by 14.9 percent.
Analysts said they are prepared for greater movements as later in the day more buyers reach the markets.
The yen ran up against the euro, the Australian dollar, and New Zealand dollars, fuelled by hopes to unlock more common cross-yenna businesses for Japanese retail investors who lost money on lira.
The dollar fell marginally to 108.82 but stood at 1,3851 dollars compared with the British pound.
It fell to 1,1892 dollars.
Two days after a sharp rate growth to reduce inflation by almost 16%, Erdogan dismissed the central bank governor and supported the lire. He did so.
Analysts predict that the new central bank governor would reverse the hawkish and orthodox measures taken to combat inflation, resulting in sustained market instability.
Fears that the volatility in Thailand’s baht, Indonesia’s rupiah, and the Philippine peso will spread to other emerging markets boosted the dollar’s value against the Thai baht, Indonesian rupiah, and Philippine peso.
China’s benchmark lending rate for corporate and household loans remained unchanged for the 11th month in a row, keeping the onshore yuan at 6.5085 per dollar.
The Australian dollar has fallen to $0.7724 due to a reduction in risk appetite. The New Zealand dollar fell to $0.7155 as well.
According to Mizuho’s Yamamoto, further falls in the Australian and New Zealand dollars are unlikely because both currencies will continue to benefit from increasing commodity prices and increased global trade.
