CURRENCIES: Dollar Index Jumps To Around One-year High As Turkey's Lira Gets Rocked
August 10 2018 - 4:22AM
Dow Jones News
By Mark DeCambre, MarketWatch
Lira has lost more than 13% over the week as international
markets soured on Turkey's capacity to repay foreign-currency
debts
The U.S. dollar strengthened to its firmest level against major
rivals on Friday, while Turkey's currency was driven sharply
lower.
The steep decline in the Turkish lira comes after the European
Central Bank expressed concern about the country, whose leader
President Recep Tayyip Erdogan was re-elected in a snap vote in
June and whose growing power has raised questions about the
independence of the country's central bank.
The lira has been consistently hovering around an all-time low
against the U.S. dollar this summer. It fell by about 5.3% against
the greenback, paring more severe losses overnight. One dollar
recently bought 5.8595 Turkish lira, compared with 5.5426
late-Thursday in New York, according to Dow Jones Market Data.
According to FactSet data, the country's lira is down 13.3% this
week, bringing its year-to-date decline to more than 35%.
The ECB has grown increasingly concerned about potential
contagion from Turkey's problems, especially in the banking sector,
according to a report from the Financial Times
(https://www.ft.com/content/51311230-9be7-11e8-9702-5946bae86e6d)
(paywall).
Read: Here's why there may be more pain in store for Turkey's
lira
(http://www.marketwatch.com/story/heres-why-there-may-be-more-pain-in-store-for-turkeys-lira-on-friday-2018-08-02)
The ICE U.S. Dollar Index , which gauges the dollar against a
half-dozen monetary units, surged amid the turmoil, and recently
was up 0.6% at 96.039.
The euro , the most significant component of the dollar gauge,
tumbled against the greenback, highlighting the spillover effect of
Turkey's dilemma on European markets. One dollar bought $1.1453
compared with $1.1526 late Thursday in New York, a decline of 0.6%.
The British pound also took a hit against greenback. Sterling last
bought $1.2758, versus $1.2824 Thursday.
"For some days, global markets have noted the Turkish lira's
plunge with more curiosity than concern, seemingly viewing it as
Turkey's problem and no one else's," said Sean Callow, currency
strategist at Westpac. "That seems to have changed."
Analysts and investors attributed the relentless pressure on the
Turkish currency to growing concerns about a large stock of loans
denominated in dollars and other currencies, and discord between
Washington and Ankara.
Turkey's limited stash of currency reserves could prompt it to
seek a bailout from the International Monetary Fund, said Paul
McNamara, investment director for emerging market debt at GAM
International Management.
(END) Dow Jones Newswires
August 10, 2018 04:07 ET (08:07 GMT)
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