Lira’s Worst Week Since 2001 Sparks Global Sell-Off: EM Review (Bloomberg)

Lira's Worst Week Since 2001 Sparks Global Sell-Off: EM Review (Bloomberg)

Bloomberg Aug 13, 2018

Turkey’s lira posted its biggest weekly loss in more than 17 years, sparking fear of global contagion as emerging-market stocks and currencies slid from South Africa to Argentina.

MSCI’s measures of EM currencies and equities declined 1 percent, each. The Bloomberg Barclays index of EM local-currency government debt dropped 0.8 percent.

Highlights for the week ended Aug. 10:

  • The Turkish lira sank as the nation refused to release American pastor Andrew Brunson; U.S. officials said they wouldn’t discuss relief for Halkbank, or one of its bankers currently in jail, until Brunson was freed
  • U.S. President Donald Trump ordered the doubling of steel and aluminum tariffs against Turkey, as President Recep Tayyip Erdogan vowed that his country won’t bow to “economic warfare”
  • Besides the lira, Russia’s ruble was among the week’s worst performers, falling to a two-year low as the U.S. said it was imposing new restrictions to punish President Vladimir Putin’s government for the March 4 nerve-agent attack on former spy Sergei Skripal and his daughter in the U.K.; Russia threatened to retaliate
  • China said it will impose 25 percent tariffs on an additional $16 billion worth of imports from the U.S. from Aug. 23, while the U.S. also said it will begin collecting duties on 279 product lines from China as of Aug. 23
  • The People’s Bank of China urged the nation’s biggest lenders to prevent any “herd behavior” and momentum-chasing moves in the foreign-exchange market, according to people familiar with the matter
  • Argentina’s Merval index of stocks fell about 8 percent in local currency terms as a federal judge probes hundreds of alleged bribes paid by construction companies, energy suppliers and electricity generators to members of the former government of Cristina Fernandez de Kirchner
  • The Philippine peso was among the week’s best performers as the central bank increased its policy rate by 50 basis points to 4 percent and raised its 2018 inflation forecast to 4.9 percent year-on-year from the previous 4.5 percent; the central bank is prepared to act again to restrain inflation, Governor Nestor Espenilla said
  • The Reserve Bank of India sold $8 billion in U.S. Treasuries in April and May as part of its intervention strategy in the currency market to prop up the rupee

(Source: Bloomberg)