Tuesday, 18 December, 2018

Turkish lira hits new low on worries over economy, USA row

Andrew Brunson an American pastor is released to home detention last month in Izmir Turkey Andrew Brunson an American pastor is released to home detention last month in Izmir Turkey
Ginger Lawrence | 10 August, 2018, 16:13

The lira lost 12pc against the dollar on Friday following an escalation of the tensions between Turkey and America.

"Turkey does not see inflation and growth as alternatives to each other", he stated, adding that the next steps of economic rebalancing would entail lowering the current account deficit and improving trust.

Korkut Boratav is more concerned and thinks an intervention by the International Monetary Fund is the only way to save the European banks.

Shares in France's BNP Paribas (BNPP.PA), Italy's UniCredit (CRDI.MI) and Spain's BBVA (BBVA.MC), the banks seen as most exposed to Turkey, fell as much as 4 percent.

"Investors have been looking at the unfolding currency crisis in Turkey as a local difficulty, however the accelerating speed of the declines appears to be raising concerns about European banks exposure to the Turkish banking system", said Michael Hewson, chief market analyst at CMC Markets UK.

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Turkey's embattled lira on Friday (Aug 10) hit new record lows against the USA dollar and euro, losing over six percent in value as strains with the United States showed no sign of abating and fears grew over the exposure of European banks. A strengthening dollar and higher US interest rates are making life hard for the weakest emerging markets. The data is expected to show inflation likely increased 0.2 percent, after rising 0.1 percent in June. Going in the opposite direction was the safe-haven Japanese yen, which hit a one-month high against the dollar. The currency has shed 22pc of its value since late July. "While they have dollars, we have our people, law and Allah", the Turkish leader said addressing citizens in the Black Sea city of Rize.

In commodities, US crude oil rose half a percent to $67.16 a barrel, while Brent crude was 0.6 percent stronger at $72.47 per barrel.

The Australian dollar, often viewed as a gauge of global risk appetite due to its reliance on commodities, was the biggest faller among developed currencies, at one point down 1 percent on the day.

Spot gold rose 0.1 percent to $1,213 per ounce.