And it just keeps getting worse.
On Tuesday, we brought you a sarcastic take on Turkey’s rather unfortunate predicament. That post was the latest in what has become daily series thanks to the fact that, simply put, things are deteriorating literally by the hour.
The palpable angst is a direct result of Erdogan’s recent Bloomberg interview in which he confirmed the market’s worst nightmare: he’s going to (basically) name himself central bank head, following next month’s farce election.
That means that whatever shred of independence CBT had left will soon be gone and any hope that sanity will be restored (where that means dropping the aversion to rate hikes in the interest of arresting the currency’s ongoing slide) will soon be dashed.
The end result: the lira is competing with the Argentine peso for the dubious title of world’s worst performing currency in 2018:
Well things took a decisive turn for the worst-er-er-er overnight when Japanese retail investors were stopped out leading to an early selloff in Asian trading amid thin liquidity. “[The] lira may have been hit by some stop loss-related moves as trading switched to Tokyo from New York,”Credit Agricole’s Yuji Saito, said.
Bloomberg, citing data from Tokyo Financial Exchange, notes that “Japanese retail investors held 323,537 contracts of a net TRY/JPY long position as of May 15, up from 266,955 at the end of last year.”
Have a look at this:
As you can see, things continued to deteriorate after that, as liquidity vacuums started to show up and ultimately, the lira’s losses continued to pile up, pushing USDTRY thorugh 4.91:
This is the worst day since the coup:
CHP isn’t amused. “The lira is in a free fall and the government should urgently take measures to stop the rout,” Faik Oztrak, deputy chairman of the opposition, said on Wednesday. “The government must issue a written commitment to the central bank’s independence.”
Good luck with that. “It seems as if the Central Bank of Turkey is waiting for a miracle, like a turn in global risk appetite, to strengthen the lira,” SEB’s Per Hammarlund, chief emerging market strategist, told Bloomberg via e-mail, adding that an emergency rate hike “would be major defeat for President Erdogan, potentially damage his re-election chances.”
Of course that assumes this is actually an election.
Meanwhile, Borsa Istanbul did its part to try and shore up confidence.
“As an indication of our confidence in the Turkish Lira, our exchange’s foreign currency assets, excluding short term needs, have been converted to lira as of today”, a statement dated May 23 and posted to its website reads.
Good luck with that, guys. Or maybe we should just quote Istanbul-based Alnus Yatirim: “God help Turkey“.
Full statement from Borsa Istanbul (translated)
Stock Exchange Istanbul Group has shifted foreign currency assets out of its short term needs to Turkish Lira as of today
May 23, 2018 – 09:00
On the basis of the evaluations made by the Stock Exchange Istanbul Group regarding the speculative movements in the currency markets of our country, The fact that our country is the fastest growing country among the G-20 member countries with the growth rate of 7.4% in 2017, the index of industrial production, which is adjusted to the calendar, will increase by 5.2 bps to 117.6 points in February 2018, The increase in exports is expected to continue in 2018 as well, indicating that the increase in exports will continue in 2018, with a 10.2% increase compared to 2016 in 2017 and a 8.9% increase in the first quarter of 2018 compared to the same period of the previous year. From $ 5 billion to $ 4.6 billion, and accordingly the current account deficit in the same period decreased from $ 7.7 billion to $ 4.8 billion,
As the Borsa İstanbul Group, we advise our companies to evaluate all kinds of risk management tools, including foreign exchange futures and options traded in our Commodity Futures and Options Market, instead of buying them from spot markets for medium and long term foreign exchange needs.
It is seen that the speculative approaches to the negative presentation of the pre-election country economy are not supported by the current economic indicators and we would like to reiterate our confidence in our economy and Turkish Lira as our stock exchange Istanbul Group all our companies and stakeholders.
It is publicized with respect.