Turkey is back in the headlines as the local elections that will take place at the end of the month, will be a referendum on President Erdogan.  Just last summer, Erdogan won a fresh mandate with Parliamentary and Presidential wins.  The economy has not improved and Turkey is back in crisis mode.

About a month ago, Turkish stocks entered bull market territory, inflation was slowly coming down from the recent 15-year highs and optimism was improving for emerging markets after the Fed signaled they will be keeping rates on hold throughout the rest of the year.

Overnight, foreign investors were unable to hedge their risks to the lira as swap rates jumped past 1,000 percent.  Local banks are being pressured to not provide liquidity to foreign investors and we are seeing them scramble for hedges by selling other emerging market currencies.  These actions by Erdogan will potentially scare investors from wanting to invest in Turkey in the future.  The Turkish lira is down 1.4% to the dollar and trading around the 5.4182 region.

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Other emerging market currencies are under pressure. The South African rand is lower by 1.1% at 14.5805.

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