Turkey currency crisis fuels risk-off mood in Asia
Yen and bonds rise while rand and Asia equities slide as fallout ripples through markets
Turkish President Tayyip Erdogan greets his supporters in Rize, Turkey © Reuters
By Edward White in Taipei
Equities and currencies moved lower while haven assets were in demand across Asia Pacific as fallout from Turkey’s currency crisis rippled through markets.
The moves came as the Turkish lira continued to slide in spite of a promise by the country’s finance minister that a plan to calm the markets would be unveiled on Monday morning. That pledge came hours after President Recep Tayyip Erdogan railed against high interest rates and described the plunge in the country’s currency as a foreign “operation”.
The lira was down 5.7 per cent at 6.7896 against the US dollar, having earlier weakened beyond 7 to hit an all-time low of 7.2149.
The latest bout of lira selling — which took the year-to-date loss for the currency to more than 44 per cent — came after Mr Erdogan said the financial “storm” had been caused by “an operation against Turkey”.
Investors had hoped Turkey would detail a plan to deal with the growing crisis, potentially including interest rate rises and other measures to staunch rapid inflation and growing economic imbalances.
Late on Sunday, Turkish finance minister Berat Albayrak was quoted in the Hurriyet newspaper as saying: “From Monday morning, our institutions will take the necessary actions with the aim of calming the markets and will share the necessary announcements with the markets.” However, he did not specify what measures would be taken.
The lira pulled back slightly in Asia-Pacific trading after Mr Albayrak’s comments and an announcement by the country’s banking regulator that it would limit swaps transactions.
The South African rand touched a two-year low against the dollar as concerns over the Turkish lira’s stability spread into other emerging market currencies.
The rand fell as much as 10.4 per cent to 15.5517 per dollar, the lowest level since June 2016, before pulling back to be down 3.3 per cent in morning trading in Hong Kong.
In China, the onshore renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily mid point set by the People’s Bank of China, fell 0.4 per cent to Rmb6.8728 per dollar. The offshore rate was down 0.3 per cent at Rmb6.8858 per dollar.
The Australian dollar was 0.3 per cent weaker at $0.7280 against its US counterpart while the UK pound and the euro, usually thinly traded in the Asia morning session, did not escape unscathed. The euro was off 0.2 per cent at $1.1382 while sterling was down 0.1 per cent at $1.2758.
The Japanese yen, typically a haven during market uncertainty, was 0.7 per cent stronger at ¥110.19 against the dollar and at its highest point in more than six weeks. The US dollar index, measuring the greenback against a basket of peers, rose 0.1 per cent to 96.413.
Sovereign bonds made gains, with the yield — which moves inversely to price — on 10-year US Treasuries down 2 basis points at 2.857 per cent. The yield on the Australian equivalent was down 2 at 2.568 per cent.
Asia’s main equity benchmarks were in negative territory.
The Topix in Tokyo was down 2.1 per cent and Hong Kong’s broader Hang Seng index slid 1.9 per cent with all segments in both markets declining. The S&P/ASX 200 in Sydney was off 0.4 per cent with the key basic materials and financials sectors dropping 1.3 per cent and 0.6 per cent, respectively.
China-focused stocks fell, with the CSI 300 index of major Shanghai- and Shenzhen-listed stocks dropping 1.9 per cent while in Hong Kong, the Hang Seng China Enterprises index was off 2.1 per cent. Further weighing on Chinese stocks, the Shanghai stock exchange on Friday announced the clampdown on trading halts by companies listed on the bourse.
Brent crude was down 0.2 per cent at $72.65 a barrel while West Texas Intermediate was off 0.1 per cent at $67.59.
The price of gold was down 0.3 per cent at $1,207 an ounce.
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