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  • Emerging Markets Debt Daily

    Turkish Lira Haunted by Politics

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    August 20, 2019
     

    The removal of pro-Kurdish mayors in Turkey and concerns about excessive easing weigh on the currency. More “drip” stimulus on the way in China.

    The Turkish lira is underperforming today due to political noise and concerns about excessive monetary easing
    . According to local press, the government removed three pro-Kurdish mayors for “spreading propaganda”, with the minister of interior saying that terrorism would not be tolerated. The political crackdown comes on the heels of yesterday’s decision to slash the reserve requirements for banks that boost lending. While additional easing can prop up growth (check Turkish equities’ rebound this morning), the quality of such expansion might not be optimal.

    The sound of “drip” stimulus is loud and clear in China. Newswires suggest that the policy rate reform can be followed by an increase in the annual quota for local government debt. Add to this Premier Li’s remark that stabilizing employment is a priority, and the direction looks clear. Meanwhile, the U.S. decision to grant another 90-day extension on sales to Huawei was met with the muted market reaction - in part because another 45 businesses associated with Huawei were added to the export “black” list.

    Argentina had a little fright this morning due to murmurs that the international monetary fund (IMF) visit would be delayed. The central bank’s governor Sandleris added to suspense, saying that he was not sure when the mission will be arriving (other than in the coming weeks). However, the IMF spokesperson asserted they will be coming soon. The much-anticipated press conference with the new Minister Of Finance Lacunza brought nothing new policy-wise. So, the limbo continues...

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