Turkish Lira Slides Almost 8% After Intervention-Driven Surge

A money changer counts Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. (Reuters)
A money changer counts Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. (Reuters)
TT
20

Turkish Lira Slides Almost 8% After Intervention-Driven Surge

A money changer counts Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. (Reuters)
A money changer counts Turkish lira banknotes at a currency exchange office in Ankara, Turkey September 27, 2021. (Reuters)

The lira tumbled almost 8% against the dollar on Monday amid persisting investor concern over Turkey's monetary policy, having surged more than 50% last week after billions of dollars of state-backed market interventions.

The lira was also supported last week by a government move to cover FX losses on certain deposits.

It weakened to as low as 11.6 against the greenback on Monday before trimming losses to trade at 11.35 by 0800 GMT.

"The main exchange rate resistance is at 11.45 and 12.0, with support levels of 10.57 and 10.25," QNB Invest said in a daily bulletin.

Last week's rally brought the Turkish currency back to mid-November levels.

Last Monday, it had plunged to an all-time low of 18.4 per dollar, after a months-long slide due to fears of spiraling inflation driven by a succession of interest rate cuts engineered by President Recep Tayyip Erdogan.

At current levels the currency is still 35% weaker than at the end of last year.

Erdogan unveiled late last Monday a scheme under which the Treasury and central bank would reimburse losses on converted lira deposits against foreign currencies, sparking the lira's biggest intra-day rally.

Turks did not sell dollars in large quantities on Monday and Tuesday of last week, according to official data that suggested they had played little role in the gains. State interventions, meanwhile, cost the central bank more than $8 billion last week, according to traders' calculations.

The central bank sold $1.35 billion in direct forex interventions on Dec. 2-3 to support the lira when it stood around 13.5 per dollar, according to data.

In an interview with broadcaster AHaber, Erdogan said Turks showed confidence in the local currency and deposits increased by 23.8 billion lira after the anti-dollarization plan announcement.

But data from the BDDK banking watchdog showed that after heavy accumulation of dollars the previous week, Turkish individual depositors held $163.7 billion of hard currencies last Tuesday, virtually unchanged from Monday and Friday, when the total was $163.8 billion.

The lira got a big boost last week from what traders and economists called backdoor dollar sales by state banks, supported by the central bank.

Under pressure from Erdogan, the central bank has slashed its policy rates by 500 basis points to 14% since September, despite inflation that has risen to more than 21%. Price rises are set to exceed 30% next year in part due to the lira depreciation, economists predict.

The main BIST 100 stock index in Istanbul rose 2.6% on Monday morning.



Gold Slips as US Bond Yields Rise, Investors Assess New Tariffs

Gold rings are displayed in a gold shop in Chinatown in Bangkok, Thailand August 21, 2018. REUTERS/Soe Zeya Tun/File Photo
Gold rings are displayed in a gold shop in Chinatown in Bangkok, Thailand August 21, 2018. REUTERS/Soe Zeya Tun/File Photo
TT
20

Gold Slips as US Bond Yields Rise, Investors Assess New Tariffs

Gold rings are displayed in a gold shop in Chinatown in Bangkok, Thailand August 21, 2018. REUTERS/Soe Zeya Tun/File Photo
Gold rings are displayed in a gold shop in Chinatown in Bangkok, Thailand August 21, 2018. REUTERS/Soe Zeya Tun/File Photo

Gold prices eased on Tuesday, weighed by higher US Treasury yields as US President Donald Trump announced new tariff proposals on trading partners, including Japan and South Korea.

Spot gold was down 0.2% at $3,328.67 per ounce, as of 1207 GMT. US gold futures fell 0.1% to $3,338.20.

The yield on benchmark US 10-year notes rose to a two-week peak, making the non-yielding bullion less attractive.

"Gold is stuck between a rock and a hard place," said UBS commodity analyst Giovanni Staunovo, Reuters reported.

"Negative for the gold price is the US decision to extend the deadline for a trade deal for many trade partners, positive for the gold price is the fact that key US trading partners in Asia might have to deal with higher tariffs in the near future, weighing on economic growth prospects."

On Monday, Trump told 14 countries that sharply higher tariffs would start on August 1, marking a new phase in the trade war he launched in April, with levies between 25% and 40%.

The new deadline was firm, Trump said, adding that he would consider extensions if countries made proposals for a trade deal.

"Reciprocal tariffs" were to be capped at 10% until July 9 to allow for negotiations, but so far, agreements have been reached only with Britain and Vietnam. In June, Washington and Beijing agreed on a framework covering tariff rates.

Meanwhile, China has warned the Trump administration against reigniting trade tensions and threatened to retaliate against nations that strike deals with the US to exclude it from their supply chains.

Trump's tariffs have stoked inflation fears, further complicating the US Federal Reserve's path to lower interest rates.

Investors await minutes of the Fed's June meeting, due on Wednesday, for more clues into the bank's policy outlook.

Spot silver fell 0.1% to $36.71 per ounce, platinum rose 0.2% to $1,372.51, and palladium rose 0.6% to $1,117.33.