EM-Lira low on fears of political missteps

The Turkish lira hit a record high on Wednesday amid concerns over monetary policy missteps, while emerging market equities saw a seven-day rally with rising Covid-19 cases hurting sentiment.

After falling nearly 3% on Tuesday, the pound slipped again to 10.45 per dollar, bringing the 2021 losses to 28% – the worst among its emerging market peers.

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Giving in to political pressure, the central bank is expected to cut its key rate by 100 basis points to 15% on Thursday, which would cause the rate to drop by 400 basis points since September, while inflation climbs to nearly 20%. Erdogan has replaced several heads and members of the central bank in his drive to cut rates in the hope that it will spur economic growth.

“After another 100bp rate cut at the November meeting, the central bank will likely halt its early easing cycle, at least until the end of the year,” Chief Economist Muhammet Mercan said – Turkey at ING, citing moderation in certain nuclei. inflation indicators among others.

Most other emerging market currencies rebounded after the dollar rallied after strong U.S. retail sales data on Tuesday hurt riskier currencies as investors raised bets on the dollar’s tightening. politics in the United States.

The MSCI Emerging Currency Index remained stable after posting its worst session in 10 weeks, with the Chinese yuan rising 0.2%, while the South African rand and Russian ruble rose 0.3% and 0.5%.

The rand hit its lowest since early January, before strengthening. Electric utility Eskom said it sees an increased risk of rotational power outages as many units in its power plants are not operating at full capacity due to unscheduled maintenance.

After Wednesday’s data showed inflation for October was unchanged from the previous month, September retail sales are later expected to contract significantly ahead of the central bank’s rate decision on Thursday.

A Reuters poll says the rate is kept at 3.5%, but most participants said it was too close to call.

Rising geopolitical tensions over Ukraine and Belarus had seen the Russian ruble exceed 73 to the dollar. It came back below that level on Wednesday, despite the fall in oil prices.

Emerging market stocks dipped 0.1% in the red with South Korean stocks falling 1.2% leading the pack in Asia, as cases of Covid-19 increased in the Asian country from the South East.

But the gains in mainland Chinese stocks and a new high for South African stocks were among those limiting the losses in the broader index.

Turkish stocks rose 0.4% after a day’s hiatus. The index has increased for 20 of the last 22 sessions. It has jumped nearly 23% during that time, reaching an all-time high on Tuesday.


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