Fears over emerging markets’ currencies ease slightly amid financial crisis in Turkey
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| A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul |
The Turkish lira recovered some of its losses on Tuesday morning as India’s national currency became the latest focus of investors’ concerns over the strength of emerging economies.
With investors fretting that Turkey’s currency woes will spread, the rupee fell to 70.09 to the dollar. Traders in Mumbai reported that the Indian central bank may have stepped in to stabilise the currency after it fell through the 70-point mark for the first time.
In Turkey, there was some respite for the lira after days of heavy losses. The currency rose 5% to 6.54 to the US dollar on Tuesday morning, after slumping 20% in the past four working days. to its banking sector.
Investors are also taking some comfort from news that Turkey’s finance minister, Berat Albayrak, will hold a conference call with investors from the US, Europe and the Middle East on Thursday, his first since assuming the post almost two months ago.
Turkey’s stock market was up 2% in early trading, after a loss of nearly 4% the day before, when Turkey’s president, Recep Tayyip Erdoğan, lashed out at the US for imposing sanctions in an attempt to force Turkey to release an American pastor, who is under house arrest.
In another sign that investor anxieties over Turkey’s market meltdown are easing, South Africa’s rand rose nearly 2.5% against the dollar after sliding more than 9% on Monday, its biggest drop since the financial crisis.
The Russian rouble also edged higher after hitting its weakest levels since 2016 on Monday, and the Mexican peso gained 1%.
The MSCI EM currency index, which tracks the main emerging markets currencies, recovered 0.3% after Monday’s 0.66% drop.
Neil Wilson, the chief market analyst at Markets.com, said: “The rand is coming off its lows but the pressure across the board is there to see. The dollar is crushing everything in its path at the moment and this is not good for emerging market or global growth.
“However, the fears of contagion can be over-egged and we note that the dangers so far seem confined to countries with large current account deficits and high dollar financing, as well as some corporates, largely banks, with exposure to that debt. Nevertheless, as stimulus is gradually unwound, we are seeing the markets test countries with exposure to dollar debt in a way not seen for some years.”
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