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.



Gold Firms; Focus on US Data for Cues on Fed's Policy Path

FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo
FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo
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Gold Firms; Focus on US Data for Cues on Fed's Policy Path

FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo
FILE PHOTO: A woman looks at a gold bangle inside a jewellery showroom at a market in Mumbai January 15, 2015. REUTERS/Shailesh Andrade//File Photo

Gold prices hovered near a four-week peak on Thursday, while focus shifted to jobs report due on Friday for clarity on the Federal Reserve's 2025 interest rate path.
Spot gold edged 0.1% higher to $2,664.30 per ounce, as of 0732 GMT. US gold futures rose 0.4% to $2,681.80
"Prices are trading in a narrow range ... A new trigger is needed for gold to breach its resistance," said Ajay Kedia, director at Kedia Commodities in Mumbai.
The bullion hit a near four-week high in the previous session after a weaker-than-expected US private employment report hinted that the Fed may be less cautious about easing rates this year.
The market now awaits US jobs report on Friday for more cues on the Fed's policy path.
Investors are also awaiting Donald Trump to take office on Jan. 20 and his proposed tariffs and protectionist policies are expected to fuel inflation.
Policymakers at the Fed's last meeting also "noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated," the minutes showed on Wednesday.
Bullion is considered an inflationary hedge, but high rates reduce the non-yielding asset's allure.
"We believe the bulk of the rally has been put in and that while gold's upward momentum may carry it higher in the near term and in early 2025, a combination of physical and financial market factors may tame the rally and drive gold moderately lower by the end of next year," HSBC said in a note.
Elsewhere, physically-backed gold exchange-traded funds (ETFs) registered their first inflow in four years, the World Gold Council said.
Spot silver added 0.2% to $30.17 per ounce, platinum dropped 0.3% to $952.54 and palladium shed 0.8% to $921.37.