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.


Iraq restarts small Kirkuk oil exports after a year of suspension

Updated 35 min 13 sec ago
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Iraq restarts small Kirkuk oil exports after a year of suspension

  • The flows resumed on Friday at a modest level of around 50,000-60,000 barrels per day

LONDON: Iraq has restarted exports of Kirkuk oil, interrupted more than a year ago amid a standoff between the central government in Baghdad and Kurdistan’s semi-autonomous region, industry sources said on Friday.
The development is a win for the US government which has been putting pressure on both sides to settle the dispute and resume flows to help address a shortage of Iranian crude in the region after Washington imposed new sanctions on Tehran.
The flows resumed on Friday at a modest level of around 50,000-60,000 barrels per day versus peak levels of 300,000 observed during some months of 2017 and it was not clear when and by how much they will rise, sources said.