Turkish lira slips a bit after local elections bruise Erdogan

The renewed slip in Turkey’s financial markets and uncertain policy reaction to recession raises a risk of further capital flight. (File/AFP)
Updated 01 April 2019
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Turkish lira slips a bit after local elections bruise Erdogan

  • The lira tumbled almost 30 percent against the dollar in lat year’s currency crisis
  • The renewed slip in Turkey’s financial markets and uncertain policy reaction to recession raises a risk of further capital flight

ISTANBUL: The Turkish lira weakened 0.3 percent against the dollar early on Monday after local elections in which President Tayyip Erdogan’s AK Party lost control of the capital Ankara and appeared to concede defeat in the country’s largest city, Istanbul.
At 0516 GMT, the lira stood at 5.57 against the US currency, having weakened as much as 5.63 and compared with a close on Friday of 5.5550.
The lira tumbled almost 30 percent against the dollar in lat year’s currency crisis. Last week, in an echo of the crisis of confidence, it swung wildly as the government and central bank unleashed a series of stop-gap support measures.
With Turkey’s economic downturn apparently weighing heavily on voters, the AK Party lost control of Ankara. Opposition Republican People’s Party (CHP) candidate Mansur Yavas won a clear victory, according to Turkish broadcasters.
In Istanbul, the vote count was so tight that both parties declared victories. The AK Party said former Prime Minister Binali Yildirim defeated his CHP rival Ekrem Imamoglu by a mere 4,000 votes — with both candidates polling more than 4 million votes. Imamoglu said he had a lead of 28,000.
In an early Monday speech, Erdogan pledged that Turkey would now focus on its troubled economy. Turkey slipped into recession late last year.
“The Istanbul uncertainty...may stay in the forefront and overshadow other developments in the markets,” said one banker who declined to be identified.
“The expectation is that emphasis will be given to needed structural reforms in a period of four years without elections. If there is a delay in this, it will increase pressures on markets,” he said, adding that the lira will likely remain in a 5.50-5.70 band while the uncertainty continues.
In the week ahead of elections Turkish stocks, bonds and the currency sold off, prompting the government to direct banks to temporarily starve a key London market of lira liquidity, according to officials.
Investors were also weighing up a statement Monday from Moody’s Rating Agency, which said the erosion of Turkey’s foreign currency reserves is a credit negative and central bank use of reserves to prop up the lira currency poses renewed questions on its transparency and independence.
The renewed slip in Turkey’s financial markets and uncertain policy reaction to recession raises a risk of further capital flight, Moody’s said, adding that the results of local polls will likely determine the future path of macroeconomic policy.


Oil prices climb on improving US demand signs, OPEC agrees to meeting date

Updated 28 min 53 sec ago
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Oil prices climb on improving US demand signs, OPEC agrees to meeting date

  • After swelling to near two-year highs, US crude stocks fell by 3.1 million barrels last week
  • Members of the OPEC agreed to meet on July 1

TOKYO: Oil prices rose nearly 2 percent on Thursday on signs of improving demand in the United States, the world’s biggest crude consumer, and as OPEC and other producers finally agreed to a date for a meeting to discuss output cuts.
Brent crude futures rose $1.13, or 1.8 percent, to $62.95 a barrel at 0611 GMT. They dropped 0.5 percent on Wednesday.
US West Texas Intermediate (WTI) crude futures were up 90 cents, or 1.7 percent, at $54.66 a barrel. WTI fell 0.26 percent in the previous session.
“It’s a very mixed bag of factors. In the US (oil) demand is likely to be picking up into summer and the OPEC meeting looks like there’s going to be an extension or even more cuts is a possibility,” said Phin Zeibell, senior economist at National Australia Bank.
After swelling to near two-year highs, US crude stocks fell by 3.1 million barrels last week, compared with analyst expectations for a draw of 1.1 million barrels, the Energy Information Administration (EIA) said.
Refined products also posted surprise drawdowns due to a rise as gasoline demand ticked higher on a weekly basis and surged 6.5 percent from a year ago.
Members of the Organization of the Petroleum Exporting Countries (OPEC) agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.
Momentum for an agreement appeared to be building as the United Arab Emirates’ energy minister told Al-Bayan newspaper that an extension is “logical and reasonable.”
Expectations the US Federal Reserve could cut interest rates at its next meeting and confirmation that the chief US trade negotiator will meet his Chinese counterpart before a meeting between President Donald Trump and Chinese President Xi Jinping next week are also supporting markets.
“Fresh stimulus from the largest economies will greatly improve the demand side argument. A positive outcome with the US — China would be icing on the cake,” said Edward Moya, senior market analyst at brokers OANDA.
Tensions remain high in the Middle East after last week’s tanker attacks, which boosted oil prices. Fears of a confrontation between Iran and the United States have mounted, with Washington blaming Tehran, which has denied any role.
In the latest escalation, Iran’s elite Revolutionary Guards have shot down a US “spy” drone in the southern province of Hormozgan, the Guards’ news website Sepah News said on Thursday.
“The geopolitical side is the wild card and can’t be predicted, not just the Iran concerns but also the trade meeting between Trump and Xi,” said Zeibell, adding “we expect to see an improvement in oil prices over the next month or two.”