Turkish Lira Teeters Near Record Low as Erdogan Secures Victory 

Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)
Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)
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Turkish Lira Teeters Near Record Low as Erdogan Secures Victory 

Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)
Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)

Türkiye's lira wobbled near record lows against the dollar as President Recep Tayyip Erdogan secured victory in the country's presidential election on Sunday, extending his increasingly authoritarian rule into a third decade.

 

The currency was at 20.05 to the dollar during Asian hours, just shy of the 20.06 record low hit on Friday.

 

The lira, prone to sharp swings before regular trading hours, has weakened more than 6% since the start of the year and lost more than 90% of its value over the past decade with the economy in the grip of boom and bust cycles, rampant bouts of inflation and a currency crisis.

 

Since a 2021 crisis, the authorities have taken an increasingly hands-on role in foreign exchange markets with daily moves having become unnaturally small and mostly recording a weakening while FX and gold reserves have dwindled.

 

"The current set up is just not sustainable," said Tim Ash at BlueBay Asset Management. "With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy."

 

Erdogan prevailed despite years of economic turmoil which critics blame on unorthodox economic policies which the opposition had pledged to reverse.

 

"An Erdogan win offers no comfort for any foreign investor," said Hasnain Malik, head of equity research at Tellimer.

 

"Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy."

 

Erdogan's surprisingly strong showing in the first round of the election two weeks ago had triggered a selloff in Türkiye's international bonds and a spike in costs to insure exposure to its debt amid fading hopes of a change in economic policy.

 

The nation's dollar bonds slipped to their lowest in at least six months last week, while the cost of insuring exposure to Türkiye's debt via credit default swaps (CDS) rose to a seven-month high.

 

On Monday, the bond maturing in 2036 was stable, Tradeweb data showed. CDS too were steady after closing at 666 basis points on Friday. It was around 480 bps before the election.

 

In his victory speech, Erdogan acknowledged that inflation was the most urgent issue, but said it would also fall, following the central bank's policy rate that was cut to 8.5% from 19% two years ago.

 

Analysts were cautious in how much economic change Erdogan's new government would herald.

 

"Erdogan is unlikely to embrace an outright economic orthodox approach," Wolfango Piccoli, co-president at advisory firm Teneo said in emailed comments.

 

"However, some adjustments to the current heterodox approach could be adopted with the aim of gaining time ahead of the March 2024 local elections."

 

Trading is expected to be thin on Monday, with many markets in Europe, as well as the United States closed for holidays.



Saudi Energy Minister: Petroleum and Petrochemical Law Guarantees Fair Competition for Investors

Saudi Energy Minister Prince Abdulaziz bin Salman. (Reuters)
Saudi Energy Minister Prince Abdulaziz bin Salman. (Reuters)
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Saudi Energy Minister: Petroleum and Petrochemical Law Guarantees Fair Competition for Investors

Saudi Energy Minister Prince Abdulaziz bin Salman. (Reuters)
Saudi Energy Minister Prince Abdulaziz bin Salman. (Reuters)

Shortly after the Saudi Cabinet approved the Petroleum and Petrochemical Law, Energy Minister Prince Abdulaziz bin Salman said on Tuesday the regulation aims to achieve a set of goals, mainly regulating petroleum and petrochemical operations, in a manner that contributes to economic growth.

The law also backs efforts to attract investments, elevates employment rates, upgrades energy efficiency, safeguards consumers and licensees, while ensuring product quality and creating a competitive environment that fuels fair economic yields for investors, the Minister said.

Prince Abdulaziz expressed his gratitude to Custodian of the Two Holy Mosques, King Salman bin Abdulaziz and Prince Mohammed bin Salman, Crown Prince and Prime Minister, for the Cabinet’s decision to approve the new law.

He praised the Saudi leadership for its support and empowerment of the energy sector, and its contribution in boosting the sector’s productivity to achieve the targets of Vision 2030.

The new law helps in building the local energy sector’s legislative framework, Prince Abdulaziz went on to say.

“This is accomplished by leveraging the top-tier international practices, boosting performance, achieving national objectives, and ensuring the optimal use of petroleum and petrochemical resources,” he said.

The new law, replacing the Petroleum Products Trade Law, helps ensure the security and reliability of local petroleum and petrochemical supplies, the minister explained.

This is on top of achieving optimal utilization of raw materials, supporting the localization of the industry’s value chain, enabling national strategies and plans, and enhancing the control and supervision of petroleum and petrochemical operations to step up compliance with laws and regulations, he added.

The new law combats practice violations by regulating the activities of use, sale, purchase, transportation, storage, export, import, packaging, and processing of these resources.

It also regulates the establishment and operation of distribution channels and petrochemical facilities, said Prince Abdulaziz.