Turk­ish lira at a record low, yuan at 8-year low

Kuwait Times - - BUSINESS -

LON­DON: The Turk­ish lira fell to a new record low yes­ter­day and the Chi­nese yuan hit an eight-year low, al­though emerg­ing mar­ket stocks rose for a sec­ond day, helped by a con­tin­ued pull back in US Trea­sury bond yields. Emerg­ing cur­ren­cies have been un­der pres­sure in the face of dol­lar strength, but do­mes­tic woes have ac­cen­tu­ated the losses in some mar­kets, with the lira tum­bling 0.7 per­cent to a record low on signs of more dis­cord be­tween Turkey and Europe.

Pres­i­dent Tayyip Er­do­gan has ac­cused Bel­gium of be­ing a cen­tre for sup­port­ers of the out­lawed Kur­dis­tan Work­ers Party (PKK) and the cleric who Ankara says or­ches­trated a failed July coup. He has also ac­cused Ger­many of not be­ing com­mit­ted to the fight against ter­ror­ism. Rox­ana Hulea, a strate­gist at So­ci­ete Gen­erale, said the lira was likely to re­main un­der pres­sure. “We do con­sider Turkey as be­ing one of the least pro­tected dur­ing this re­newed pres­sure on EM,” she said. The Chi­nese yuan also hit an eight-year low as the cen­tral bank set a weaker daily guid­ance rate.

Com­merzbank noted that after the yuan’s in­clu­sion in the spe­cial draw­ing rights bas­ket of cur­ren­cies in Oc­to­ber, the yuan had de­pre­ci­ated by more than 3 per­cent, trig­ger­ing con­cerns over a pos­si­ble col­lapse. “It is hardly the case, in our view. On one hand, (the yuan) in­dex is gen­er­ally sta­ble since Au­gust, sug­gest­ing (its) weak­ness re­flects a broad US dol­lar strength.” But the bank’s an­a­lysts also noted China’s for­eign re­serves had dropped for four con­sec­u­tive months since mid-2016, in­di­cat­ing that the cen­tral bank was still ac­tively in­ter­ven­ing in the mar­ket. The yuan has de­pre­ci­ated 5.4 per­cent against the dol­lar so far this year.

The Mex­i­can peso, which has been pum­meled hard­est by Repub­li­can Don­ald Trump’s shock US elec­tion win last week, slipped 0.3 per­cent from a six-day high, after gain­ing 2 per­cent on Tues­day. An­a­lysts ex­pect the volatil­ity to con­tinue un­til there is more clar­ity on Trump’s poli­cies. “It is a mar­ket con­sen­sus that the peso is un­der­val­ued, but be­cause it is at the eye of the storm it is very dif­fi­cult to ad­vo­cate bot­tom fish­ing at this point,” said Hulea. The Rus­sian rou­ble also weak­ened against the dol­lar, down 1.9 per­cent, as in­vestors eyed de­vel­op­ments in the govern­ment fol­low­ing the dis­missal of the econ­omy min­is­ter over al­le­ga­tions of cor­rup­tion.

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