Turkish lira weakens, Moody's delivers more downgrades

People look at foreign exchange rates in Ankara, Turkey, on August 28, 2018. / AFP / ADEM ALTAN
Updated 28 August 2018
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Turkish lira weakens, Moody's delivers more downgrades

ISTANBUL: The Turkish lira weakened on Tuesday as investors weighed up Turkey's efforts to manage its rift with the United States after Finance Minister Berat Albayrak said U.S. trade sanctions against Ankara could destabilise the Middle East.
The currency has lost about 38 percent of its value against the dollar this year due to a sell-off accelerated by a row with Washington over an American evangelical Christian pastor detained in Turkey on terrorism charges.
More broadly, investors are worried about the direction of monetary policy under President Tayyip Erdogan. The president, a self-described "enemy of interest rates" has repeatedly put public pressure on the central bank and picked Albayrak, his son-in-law, as finance minister.
The attendant sell-off in the lira has raised concerns about the impact on the broader economy - given Turkey's reliance on dollar-denominated energy imports - and a possible surge in bad loans in the banking sector.
At 1527 GMT, the lira stood at 6.2561 against the dollar, weakening from a close of 6.1200 on Monday, when it weakened to near 6.3 before rebounding in its first day of trade after a week-long holiday.
The main stock index rose 2.83 percent by Tuesday's close to 93,866.94 points.
"At this point in time Turkey has become pretty much un-tradable," said Tim Ash of BlueBay Asset Management in emailed comments. "The market wants to see specific delivery on policy whether that is monetary, fiscal or action to clear up problems in the banking sector."
Germany denied a report that it might provide financial aid to Turkey to help it weather the currency crisis.
Also on Tuesday ratings agency Moody's downgraded 20 Turkish financial institutions, saying there were signs of substantial increase in risk of a downside scenario. It said Turkey's operating environment had deteriorated beyond previous expectations.
"TURKEY MUST REFORM ITSELF"
Facing economic pressure from the United States, Turkey has signalled a wish to improve strained ties with the European Union, which it still aspires to join despite disagreements.
After meeting his French counterpart in Paris on Monday, Albayrak also took aim at the United States, saying U.S. sanctions could ultimately aggravate the region's terrorism and refugee crises..
Both Erdogan and Albayrak are also set to visit Germany at the end of September.
The Wall Street Journal reported that Germany was in early stage talks to provide emergency financial aid to Turkey, fearing its economic troubles could spread to Europe and further destabilise the Middle East. But a German official denied this.
"You can't do much from the outside but to stress that Turkey must reform itself," a second official told Reuters.
U.S. President Donald Trump this month authorised a doubling of duties on aluminium and steel imported from Turkey, triggering retaliatory measures from Ankara.
Investors are also worried by a U.S. Treasury investigation into state-owned Turkish lender Halkbank, which could face a potentially hefty fine over allegations of busting sanctions on Iran. The bank has said all its transactions were legal.
Turkey and the United States are also at odds over their diverging interests in Syria and U.S. objections to Ankara's plan to buy Russian defence systems.
Separately, Ankara announced a new campaign on Tuesday to support the real estate sector, offering a 10 percent discount on some home sales. Under the campaign, any price increases due to rising exchange rates will be discounted from the cost of the residence, the environment and urbanisation minister said.


Egypt stock market plunges as retail investors take flight

Updated 22 min 58 sec ago
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Egypt stock market plunges as retail investors take flight

  • Biggest index drop in Egypt since mid-2016
  • Saudi Arabia outperforms in Gulf

LONDON: Egyptian stocks tumbled to their lowest level this year on Wednesday as retail investors took flight.
A sharp rise in Suez Canal revenues, a major foreign exchange earner for the country, was not enough to quell investors concerns about the strength of the currency.
The main Egyptian stock index lost 3.8 percent which some fund managers blamed on generally negative sentiment toward emerging markets worldwide as well as more local speculation about possible currency devaluation.
“Our channel checks suggest the sell-off in the Egyptian market is local retail and institutions driven, on currency fears and speculation over a further round of devaluation,” said Vrajesh Bhandari, portfolio manager at Al Mal in Dubai, Reuters reported.
“Selling is further intensified as margin calls are triggered and technical support levels break down. The country canceled three consecutive Treasury auctions, citing investors’ unrealistic yield demands.”
Egypt’s Suez Canal revenues rose to $502.2 million in August up 6.7 percent from a year earlier according to official data released on Wednesday.
Elsewhere regional stock markets closed mostly lower with the exceptions of Abu Dhabi which edged 0.2 percent higher and Saudi Arabia, the best regional performer, which rose by 1.1 percent.
Saudi stocks are benefiting from the strong oil price which eased slightly yesterday but still hovered just under $79.
OPEC and some other oil producers including Russia will meet in Algeria on Sept. 23 to discuss how to allocate supply increases within their quota framework to offset the loss of oil exports from Iran following the introduction of sanctions by the US.
Those measures will come into force on Nov. 4 and data suggests that buyers are already retreating from Iranian crude purchases.
A key question for the oil price as well as regional stock markets in the weeks ahead will be the extent to which other Gulf oil exporters can compenaste for the loss of Iranian supplies by pumping more.