Turkish Lira at record low against greenback

The Turkish lira fell to a new record low on Nov. 16 together with the Chinese yuan, although emerging market stocks rose for a second day, helped by a continued pull back in U.S. Treasury bond yields, Hurriyet Daily reported. The dollar soared to its highest since April 2003 against a basket of currencies yesterday, reaching its strongest in a year against the euro as major banks and investors debated the possibility of another move toward euro-dollar parity. The Turkish lira traded at 3.3265 against the greenback yesterday after the markets closed. 

Following a week-long rally driven by the postelection surge in U.S. bond yields, some of the major banks have been sounding more cautious on the dollar’s immediate prospects. Emerging currencies have been under pressure in the face of dollar strength, but domestic woes have accentuated the losses in some markets, with the lira tumbling 0.7 percent to a record low on signs of more discord between Turkey and Europe, according to Reuters. 

Roxana Hulea, a strategist at Societe Generale, said the lira was likely to remain under pressure. "We do consider Turkey as being one of the least protected during this renewed pressure on emerging markets,” she said. The Chinese yuan also hit an eight-year low as the central bank set a weaker daily guidance rate.

Commerzbank noted that after the yuan’s inclusion in the special drawing rights basket of currencies in October, the yuan had depreciated by more than 3 percent, triggering concerns over a possible collapse The Mexican peso, which has been pummeled hardest by Republican Donald Trump’s shock U.S. election win last week, slipped 0.3 percent from a six-day high, after gaining 2 percent on Nov. 25. Analysts expect the volatility to continue until there is more clarity on Trump’s policies. 

"It is a market consensus that the peso is undervalued, but because it is at the eye of the storm it is very difficult to advocate bottom fishing at this point,” said Hulea. The Russian rouble also weakened against the dollar, down 1.9 percent, as investors eyed developments following the dismissal of the economy minister over allegations of corruption. U.S. 10-year yields were around 10 basis points off the 10-month highs hit earlier this week, providing some respite for riskier assets. The era of low global interest rates is not expected to come to an abrupt end, Federal Reserve policy maker James Bullard said yesterday, although a rise in U.S. productivity growth would normally require a rise in its rates.  "There were a lot of predictions that if the election went the way of Republicans and President-elect Donald Trump then there would be great deal of volatility, but that has not materialized so far,” Bullard said at a UBS conference in London. It would be a surprize if Fed does not increase rates in December, he said.