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FOREX-Turkish lira falls on central bank shake-up, dollar and yen advance

Published 22/03/2021, 06:27
Updated 22/03/2021, 06:30
© Reuters.

* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
* Fall in lira raises concerns about other emerging markets
* Yen gains early on speculation about Japan retail
investors
* Risk aversion supports dollar against other currencies

By Stanley White
TOKYO, March 22 (Reuters) - The Turkish lira slumped toward
a record low versus the dollar after President Tayyip Erdogan
stunned investors over the weekend by replacing the hawkish
central bank governor with a critic of high interest rates.
The yen rose against the euro and the antipodean currencies
on speculation that Japanese investors who have been buying the
lira recently for its high rates will cut losses and close out
their positions.
Worries that events in Turkey will cause disruptions in
other financial markets also supported the dollar because of its
status as a safe-harbour currency.
"Other emerging market countries are not in the same
position as Turkey, but there still could be some contagion,"
said Masafumi Yamamoto, chief currency strategist at Mizuho
Securities in Tokyo.
"There are concerns that people will start taking profits in
other markets. This looks like a time to re-think your
investment strategy, because the rotation into higher-yielding
emerging market currencies will be put on hold."
The Turkish lira TRYTOM=D3 stood at 8.0500 per dollar,
down 10% from its close on Friday.
At one point the lira fell by as much as 14.9% to 8.4850,
which is close to a record low of 8.5800.
Analysts said they are braced for bigger moves as more
investors enter markets later in the day.
The yen edged up against the euro EURJPY= , the Australian
dollar AUDJPY= and the New Zealand dollar NZDJPY= , boosted
by expectations that Japanese retail investors who lost money on
the lira will unwind other popular cross yen trades.
The dollar eased slightly to 108.82 yen JPY=D3 but
steadied against the British pound GBP=D3 at $1.3851.
The euro EUR=D3 fell slightly to $1.1892.
Erdogan fired the central bank governor only two days after
a sharp rate increase that was meant to head off inflation of
nearly 16% and support the lira. The new central bank governor will most likely lead to a
reversal of the hawkish and orthodox steps taken to battle
inflation, which could lead to prolonged market volatility,
analysts said.
"After regaining investor confidence with a series of
aggressive rate hikes, Turkey has snatched defeat from the jaws
of victory," analysts at Brown, Brothers and Harriman wrote in
memo.
Worries that turmoil would spread to other emerging markets
helped the dollar rise against the Thai baht THB= , the
Indonesian rupiah IDR= , and the Philippine peso PHP= .
The onshore yuan CNY=CFXS held steady at 6.5085 against
the greenback after China kept its benchmark lending rate for
corporate and household loans unchanged for an 11th straight
month. A decline in risk appetite weighed on the Australian dollar
AUD=D3 , which fell to $0.7724. The New Zealand dollar NZD=D3
also fell slightly to $0.7155.
Further declines in the Aussie and the kiwi are likely to be
limited because both currencies will still benefit from rising
commodity prices and an acceleration in global trade, Mizuho's
Yamamoto said.

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========================================================
Currency bid prices at 0512 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR=EBS $1.1892 $1.1906 -0.11% -2.67% +1.1900 +1.1870
Dollar/Yen JPY=D3 108.8200 108.8650 -0.14% +5.25% +108.9500 +108.7050
Euro/Yen EURJPY= 129.41 129.58 -0.13% +1.96% +129.6000 +129.0500
Dollar/Swiss CHF=EBS 0.9294 0.9290 +0.04% +5.05% +0.9311 +0.9260
Sterling/Dollar GBP=D3 1.3851 1.3859 -0.04% +1.40% +1.3855 +1.3819
Dollar/Canadian CAD=D3 1.2500 1.2500 -0.01% -1.85% +1.2534 +1.2498
Aussie/Dollar AUD=D3 0.7724 0.7745 -0.24% +0.44% +0.7734 +0.7689
NZ NZD=D3 0.7155 0.7168 -0.13% -0.31% +0.7162 +0.7136
Dollar/Dollar


All spots FX=
Tokyo spots AFX=
Europe spots EFX=
Volatilities FXVOL=
Tokyo Forex market info from BOJ TKYFX

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World FX rates https://tmsnrt.rs/2RBWI5E
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

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