SYDNEY (Reuters) – Asian markets were nervous Monday when a dip in the Turkish lira tested risk appetite, and stocks and bonds showed only a limited bid for safe havens.
The dollar traded 12% higher at 8,100 on the lira, but it was from an early high of 8.4850 amid speculation that the Turkish authorities would intervene to block the way.
The slide comes after President Tayyip Erdogan shocked markets by replacing the central bank’s Turkish governor with a critic of high interest rates.
“Erdogan’s decision to fire Governor Agbal, which sought to bring about price stability and perception of the bank’s independence, now raises the question of whether the new governor will look at lower rates while still trying to drive higher inflation. fight, “said Rodrigo Catril, a senior FX strategist at NAB.
After an initial struggle, sentiment seemed to stabilize, and MSCI’s broadest index of Asia-Pacific stocks outside Japan was anything but flat.
The Japanese Nikkei fell 1.4%, which is not helped. Japanese retail investors may experience losses in large long positions in the high-yield lira.
Nasdaq futures rose 0.1%, while S&P 500 futures fell 0.1%. Yields on ten-year treasury notes declined by a few basis points to 1.71%, indicating that there was no widespread rush to safety.
Investors are still struggling with the recent rise in US bond yields, which has stretched the valuation of equities in some sectors, especially technology.
Securities faltered again on Friday when the Federal Reserve decided not to extend a capital concession for banks, which could reduce their demand for treasury.
However, the damage has been limited by the Fed’s promise to work on the rules to prevent tensions in the financial system.
A number of Fed officials are speaking this week, including three actions by President Jerome Powell, which offer many opportunities for more volatility in markets.
SEE EMERGING MARKETS
Monday’s tumble in the lira got the yen modest, with gains on the euro and Australian dollar. This dragged the euro back on the dollar slightly to $ 1.1889.
After an initial slip, the dollar soon stood at 108.86 yen, while the dollar index was higher on 92,080.
The yen also supports concerns that Japanese retail investors who have built up long lira positions, which are a popular trade for the yield-hungry sector, may be squeezed out and cause another round of lira sales.
Analysts at Citi still doubt that the episode will lead to widespread pressure on emerging markets, noting that the last time the lira slipped in 2020 was little wasted.
“As for the impact on other parts of the EM with high returns, we believe it will be very limited,” Citi said in a note.
There was a scant sign of a safe haven demand for gold, which fell 0.3% to $ 1,739 per ounce.
The oil price fell again, crashing by almost 7% last week as concerns about global demand prompted speculators to profit on long positions after a long run. [O/R]
Brent declined 53 cents to $ 64.00 a barrel, while U.S. crude oil lost 55 cents to $ 60.87 a barrel.
Reporting by Wayne Cole; Edited by Peter Cooney and Lincoln Feast.