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Rates & Bonds


TURKISH LIRA SEESAWS AS CENBANK INTERVENES, ERDOGAN SPEAKS

By Tuvan Gumrukcu and Ezgi Erkoyun
 * 
 * 
 * 
 * 
 * 

4 minute read

Turkish lira banknotes are seen placed on U.S. Dollar banknotes in this
illustration taken, November 28, 2021. REUTERS/Dado Ruvic/Illustration

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 * Summary

 * Bank directly intervened with 'selling transactions'
 * Lira has lost 47% of value against dollar this year
 * Erdogan sticks to low rates policy despite high inflation
 * President's support down in polls, elections due by 2023

ISTANBUL, Dec 1 (Reuters) - A sharply fluctuating Turkish lira flirted with
record lows on Wednesday as the central bank said it had intervened to prop up
the currency, while President Tayyip Erdogan reaffirmed his determination to
stick with steep rate cuts.

The emerging market currency logged its second worst month ever in November,
hammered by Erdogan's widely criticised endorsement of sharp monetary easing
despite soaring inflation.



The central bank - which Erdogan has overhauled and pressured this year - said
it had intervened directly in the market "due to unhealthy price formations in
exchange rates".

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The lira , which had earlier weakened as far as 13.87 to the dollar, rebounded
to 12.42 - a rally of more than 8% on the day. However, by 1613 GMT, it was just
0.5% firmer at 13.3485.



"We have no doubt that (CB) intervention will fail if the intention is to
stabilize the currency, though it could provide some more two-way risk in the
near term. In fact, the move worries us even more," said Brown Brothers
Harriman.

"Spending precious FX reserves suggests that the government is still holding the
line in its economic policies, making the adjustment even more painful."



Erdogan is putting his political future on the line with a risky wager that
driving down interest rates will reverse his skidding opinion polls ahead of
elections due by mid-2023, despite the heavy economic toll that a sliding lira
has taken on voters.

The currency slumped to an all-time low 14.0 on Tuesday after Erdogan defended
the economic policy and as the dollar benefited from hawkish U.S. Federal
Reserve comments. read more

On Wednesday, for the sixth time in two weeks, Erdogan affirmed his commitment
to low interest rates, vowing to fix inflation rapidly and telling Turks not to
panic. read more

"Turkey has now abandoned the monetary policy based on high interest rates that
caused several developing countries to remain stagnant," Erdogan said, as data
from Copley Fund Research showed global emerging market equity fund managers had
cut their Turkish bank holdings to a record low. read more

"Instead, we have transitioned to a growth strategy ... Interest rates are an
evil that make the rich richer and the poor poorer," Erdogan told lawmakers from
his ruling AK Party.

The currency has lost as much as 47% of its value this year, sinking some 30% in
November alone, rapidly eroding Turks' earnings and savings, upending household
budgets and even leaving them scrambling to find some imported medicines. read
more

'NO TURNING BACK'

Lira implied volatility gauges soared with the nine-month gauge hitting 35.8,
revisiting the all-time record of August 2018, while longer-dated Turkish
dollar-denominated sovereign bonds maturing 2030 or beyond slipped as much as
0.9 cent in the dollar , Tradeweb data showed. , ,

In an interview with state broadcaster TRT on Tuesday evening, Erdogan said
there was "no turning back" from the new policy, defending an easing policy
which most economists have called reckless.

Support for his AK Party is tumbling in opinion polls that show Erdogan would
lose head-to-head against his most likely presidential opponents.

Under pressure from Erdogan, the central bank has since September cut its policy
rate by 400 basis points to 15%, leaving real rates deeply negative, with
inflation near 20%. It is widely expected to lower it again in December.

The opposition has called for an immediate policy reversal and snap elections.

Virtually all other central banks are raising rates or preparing to do so, and
economists say the depreciation and accelerated inflation - which is seen
reaching 30% next year due in large part to the currency devaluation - will
derail Erdogan's plan.

A Reuters poll forecasts that November inflation, due on Friday, will rise to a
three-year high of 20.7%. read more

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Additional reporting by Ece Toksabay; Writing by Daren Butler; Editing by
Jonathan Spicer, William Maclean and John Stonestreet

Our Standards: The Thomson Reuters Trust Principles.


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RATES & BONDS

Rates & Bonds · NaN:NaN PM undefinedCanadian dollar turns lower as oil rally
fizzles

The Canadian dollar weakened against its U.S. counterpart on Wednesday, giving
back its earlier gains as a rebound in oil petered out and investor appetite for
risk remained fragile.

Rates & BondsYields pare gains after Omicron variant found in U.S.

Longer-dated U.S. Treasury yields were little changed after giving up earlier
gains on Wednesday as the Omicron coronavirus variant was found in the United
States, though short-dated yields stayed higher on chances that the U.S. Federal
Reserve will speed up its bond purchase tapering.

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disrupts travel - sourcesNaN:NaN PM undefined
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imbalancesNaN:NaN PM undefined
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allianceNaN:NaN PM undefined



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