ANKARA: The Turkish lira took a breather on Friday after a historic rally from record lows this week, while emerging markets currencies and stocks were broadly steady in thin trading with Chinese equities hit by a local outbreak of COVID-19.
The lira eased to 11.7 per dollar – though after having strengthened to 10.25 on Thursday, its strongest level in over a month, following a series of measures by the government and central bank to prop up the currency.
The Turkish central bank’s net international reserves were down to $12.16 billion as of Dec 17, levels last touched in May, data showed, reflecting recent open-market interventions that have run to $6-$10 billion this month.
President Tayyip Erdogan unveiled new measures this week aimed at guarding local currency savings against currency fluctuations, driving a sharp rebound in lira, which hit a record low of 18.4 a dollar on Monday.
The currency is on course to notch its best weekly run ever, with a near 40 per cent gain, after spiralling lower in the recent months after a series of interest rate cuts and a surge in inflation.
“Turkey local markets continue to exhibit high volatility,” Morgan Stanley’s Min Dai said in a note.
“A small UW (underweight) in both bonds and FX by almost all real-money investors generated significant positive alpha in the past two months. With poor liquidity, investors are likely to continue to keep UW or neutral positions in Turkey.”
Broadly, the MSCI’s index of EM currencies edged up with the South African rand and the Russian rouble extending recent gains on easing concerns around the Omicron variant of the coronavirus.
Russia’s President Vladimir Putin said on Thursday that the country wants to avoid conflict with Ukraine and the West, but needs an “immediate” response from the United States and its allies to its demands for security guarantees.
Investors have been concerned about geopolitical risks, with Ukraine at the centre of East-West tensions after the United States and Kyiv accused Russia of preparing a new attack on its southern neighbour, an allegation Moscow denies.
Meanwhile, an index of EM equities was little changed as trading volumes dwindled ahead of Christmas and New Year holidays and with several regional markets closed.
Shanghai shares closed lower as rising COVID-19 infections in China’s city of Xian spurred a lockdown of its 13 million residents, and several companies said their operations have been affected.
Meanwhile, US President Joe Biden on Thursday signed into law legislation that bans imports from China’s Xinjiang region over concerns about forced labour.
