The Turkish Lira is taking lumps today. Erdogen is blaming the great Satan.
Turkey’s lira crisis: How bad can it get?
Three, four, five, six… What next?
Turks have over the last half decade counted the rapid depreciation of the Turkish lira on the screens outside doviz (exchange) booths with a mixture of bewilderment, alarm and ironic amusement.
The currency had spent much of 2014 hovering at just over two to the dollar but broke through the three mark for the first time after the 2016 failed coup bid and then slid to four earlier this year.
But the haemorrhaging reached an unprecedented intensity in the last weeks as Turkey’s ties with the United States strained further and markets questioned their trust in Turkish policymakers, pushing the currency to five against the dollar.
A new bout of selling on Friday on increased strains with the US forced the lira over six against the dollar for the first time, with the currency at one point shredding a quarter of its value in a single day.
Economists say that while the government may be tempted to muddle through the current situation in the hope the external and economic background improves, the lira’s fall harbours considerable dangers for the economy, in particular the banking system
Erdogan has silenced the press, taken control of the legislative, the executive, the judicatory and the central bank. He seems intent on blaming everyone but himself, but the defacto dictator cannot see that it is he who has caused this.
Well the narrative is that there is a rush to the dollar LoL, with Gold not doing too good the last few months. If the USD was such a safe haven why are the 10year yields nearly 3%, while Germany is 0.3% and even the UK is 1.3%.
**Gold hits 17-month low as investors seek refuge in dollar **
**Gold prices sank below $1,200 per ounce for the first time in 17 months on Monday, losing out to U.S. Treasuries and a stronger dollar as investors sought refuge from a financial market rout triggered by a crashing Turkish lira.
Investors traditionally use gold as a means of preserving the value of their assets during times of political and economic uncertainty and inflation.
But it has this year failed to benefit as investors made a beeline for U.S. Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.
A higher U.S. currency also makes dollar-denominated assets more expensive for holders of other currencies, which subdues demand - a relationship used by funds to generate buy and sell signals from numerical models.
Spot gold had dropped 0.8 percent to $1,201.31 an ounce by 1314 GMT, having earlier dipped to $1,194.61, its lowest since March 2017.
U.S. gold futures were down 0.8 percent at $1,208.60 an ounce.
The lira has tumbled on worries over Turkish President Tayyip Erdogan’s increasing control over the economy and deteriorating relations with the United States.
“Gold is not doing what a lot of investors had hoped it would do,” said Andrew Cole, multi asset manager at Pictet Asset Management, referring to gold losing its safe-haven appeal.
“The longer it doesnt behave as a risk-off hedge the more likely it is that it won’t.”
Bearish sentiment can be seen in data from U.S. Commodity Futures Trading Commission showing gold speculators added 22,195 contracts to their net short position in the week to Aug. 7, bringing it to 63,282 contracts, the largest since records became publicly available in 2006.
Holdings of the largest gold-backed exchange-traded fund (ETF), New York’s SPDR Gold Trust, at 25.3 million ounces have dropped about 10 percent from their April peak and are at their lowest since Feb 2016.
First resistance in gold is seen at $1,212.50 and then at the overnight high of $1,221.40 while initial support is seen at $1,200.00 and then at $1,190.00, Kitco Metals said in a note.
Meanwhile, platinum prices headed towards the 10-year lows below $800 an ounce seen last month, due to a glut of metal.
Platinum is heavily used in catalysts in diesel vehicles that have fallen out of favor since 2015’s Volkswagen emissions-rigging scandal.
The world’s top producer of platinum is South Africa, which saw its rand currency hit a two-year low due to contagion.
“Supply is holding up well as a weaker rand provides support to South Africas mining industry,” Julius Baer analyst Carsten Menke said in a recent note, adding this was because it would lower rand-based costs when expressed in dollars.
Silver slipped 0.5 percent to $15.19 an ounce and palladium lost 0.7 percent to $903.69.
Well the narrative is that there is a rush to the dollar LoL, with Gold not doing too good the last few months.
If the USD was such a safe haven why are the 10year yields nearly 3%, while Germany is 0.3% and even the UK is 1.3%.
This isn’t the first time the Turkish lira has tanked, it was only a few years ago that they took several zeros off the notes.
Edit: according to wikipedia:-
Russell Napier was predicting this back in 2017, it looks like he has been proven right!
What’s most scary here though is that his updated thoughts are that a Turkish default would only be the first of a wave of defaults within emerging market economies.
Sorry for the link to Zerohedge, but this is one that is actually worth reading
zerohedge.com/news/2018-08- … t-all-time
eh, you know he Fed has been raising interest rates ??(see dot plot for their predicted hikes). UK/EZ not so much
meh, curve still flat - 30bps difference between 5 and 10Y rates!!! 25bps between 2Y and 10Y! hardly Zimbabwe
US 2-year yield rises to highest since 2008 after Fed hikes rates; 10-year yield jumps back above 3%
U.S. government debt yields rose Wednesday after the Federal Reserve hiked its benchmark short-term interest rate a quarter percentage point and indicated that two more increases are likely in store.
The 2-year yield hit its highest level since 2008 and the yield on the benchmark 10-year Treasury note rose to 3 percent, following the Fed’s announcement. The yield on the 30-year Treasury bond was also in the green at 3.095 percent while the 5-year yield hit a fresh high of 2.857. Bond yields move inversely to prices.
The fed has also scaled back QE.
But yet the Trump presidency (to some extent the catalyst for this crisis) needs a weak dollar to address the trade deficits. Irresistable force meets immovable object.
Eur/usd at 1.14 it was up around 1.24 as recently as April.