Turkish lira slides to record low amid Armenian tensions

The lira has performed poorly this year. (Reuters)
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Updated 30 September 2020

Turkish lira slides to record low amid Armenian tensions

  • The lira, already among the worst performing European currencies this year

BENGALURU: The Turkish lira hit a record low on Monday amid growing concerns around clashes between Armenian and Azeri forces, while emerging market stocks tracked gains in Asia as data showed a jump in Chinese industrial profits.

The lira tumbled 1.5 percent to a low of 7.79 against the dollar, while the Russian rouble eased for the fourth straight session. Azerbaijan and Armenia sovereign dollar-denominated bonds fell as much as 3 to 4 cents.

“Fears are that Turkey gets dragged into another regional conflict,” said Timothy Ash, EM sovereign strategist at BlueBay Asset Management, referring to the fighting over Nagorno-Karabakh, an enclave in Azerbaijan controlled by ethnic Armenians.

The lira, already among the worst performing European currencies this year, received a brief respite last week following a surprise move by the central bank to raise its key lending rate, but analysts said the average interest rate might not rise by much.

“Such temporary high interest rates, which attempt to purge out short lira positions, make little difference to the medium-term trend because speculative short positions against the lira are not really the reason behind its depreciation,” said Tatha Ghose, FX analyst at Commerzbank.
An index of emerging market currencies was flat in early trade, with the South African rand easing slightly against the dollar.
The Hungarian forint was nearly unchanged versus the euro. Ratings agency Moody’s on Friday raised Hungary’s sovereign rating outlook to “positive” from “stable,” partly citing improvements in the domestic and external debt position.

The Swedish krona was a touch higher as data showed retail sales jumped 3 percent in August from a year earlier.

A basket of developing world stocks was up 0.9 percent and on track for its best day in two weeks, propped by gains in Russia.

Tech-focused South Korean and Taiwanese stocks also jumped as investors priced in a boost from tighter US curbs on China’s biggest chipmaker.

The South African stock index jumped 1.9 percent, while the Turkish bourse shed 0.5 percent.


Researchers say new model shows Turkish inflation well above official tally

Updated 22 October 2020

Researchers say new model shows Turkish inflation well above official tally

  • Since last year, opposition lawmakers have raised questions about the accuracy of official inflation data
  • Year-on-year inflation was 11.75% according to the official tally announced earlier this month

ISTANBUL: Turkish monthly inflation was more than triple the official rate in September, according to a new model developed by a group of academics and researchers based on more frequent data than the government statistics office.
Veysel Ulusoy, a professor at an Istanbul-based university and head of the independent Inflation Research Group (ENAG), said the model collects “several times more” price data than the official Turkish Statistical Institute (TUIK) tally, and is meant to complement it.
Since last year, opposition lawmakers have raised questions about the accuracy of official inflation data, arguing that the published rate was lower than the market realities.
According to ENAG’s first published finding, consumer prices in September rose 3.61% from the previous month, compared to TUIK’s calculation of 0.97% increase.
Year-on-year inflation was 11.75% according to the official tally announced earlier this month. ENAG has not yet published a year-on-year figure.
TUIK was not immediately available for comment.
“We observed price differences and volatility in almost all groups in the basket,” Ulusoy said in an interview. ENAG brings together academics from multiple Turkish universities.
“TUIK collects 550,000 prices for all the basket items in a month. ENAG calculations include several times more than that, constructing a richer set of data,” Ulusoy said.
Turkish annual inflation has remained in double digits this year despite a sharp economic contraction in the second quarter due to the coronavirus pandemic. High prices and a record low lira prompted the central bank to raise interest rates last month, and it is expected to hike again on Thursday.
The ENAG model can calculate inflation as frequently as every hour, meaning it can fill gaps for researchers and investors, Ulusoy said. It weighs items in the same way as TUIK, but excludes price data from health, education spending and alcoholic drinks.
The September calculation showed that school-related items had the most price spikes including computers, tablets and mobile phones, as well as children’s’ clothing and some agricultural goods.
Ulusoy said the ENAG model showed that tablets and computer prices were up more than 30% in September from August due to school reopenings, while TUIK put these items at around 4% month-on-month.
Last year opposition parties submitted parliamentary questions to Finance Minister Berat Albayrak over claims that TUIK tweaked inflation data for political reasons, claims dismissed as groundless by the head of the institute.