Fresh Decline in Turkish Lira

September 18, 2018

Turkey grabbed the currency market spotlight on a day otherwise devoid of meaningful data to be reported. The lira dropped 2% against the dollar as President Erdogan took aim against opposition party members of IsBank’s Board of Trustees. The lira’s loss erased the recovery that occurred last week after the Turkish central bank sharply raised its interest rate to 24%.

The dollar is otherwise unchanged against the euro, Swiss franc, Mexican peso, and Canadian dollar. The dollar has firmed 0.3% against the yen and rand and by 0.2% versus the yuan and sterling but slipped 0.5% against the ruble, 0.3% relative to the Australian dollar and 0.1% vis-a-vis the New Zealand dollar.

Ten-year British, German and Japanese sovereign debt yields are unchanged, but U.S. Treasury futures firmed a basis point.

The price of gold is flat, while WTI oil increased 1.2%.

Asian share prices have resiliently withstood yesterday’s U.S. announcement of a 10% tariff on $200 billion of Chinese imports. Without a trade deal, that duty will swell to 25% next year, but stock markets today rose 1.8% in China, 1.4% in Japan, 0.9% in Hong Kong, 0.4% in New Zealand and 0.3% in South Korea. Equity markets in Europe are so far up 0.2% in Germany, France, the U.K., and Spain.

The Bank of Japan’s Board began a two-day policy meeting today. No change in stance is anticipated.

Minutes from the last Reserve Bank of Australia board meeting welcomed this year’s depreciation of the Aussie dollar as having promoted economic growth. The minutes recognize continuing risks such as soft wage growth and external uncertainties.

The year-on-year change in Australian house prices turned negative last quarter. A drop of 0.6% from 2Q17 followed on-year advances of 2.0% in the first quarter, 6.0% in the final quarter of 2017 and 10.2% in the second quarter of 2018. House prices posted a 0.7% quarter-on-quarter decline, matching the drop between 4Q17 and 1Q18.

Italian industrial orders recorded their fifth monthly slide of 2018 in July, dropping 2.3%  but were still 2.8% higher than in July 2017. Industrial sales slipped 1.0% on month, cutting the on-year advance to 2.9% from 4.7%.

Unemployment in Hong Kong was 2.8% in August, matching results from July and the second quarter. The jobless rate had been at 2.9% in the first quarter of 2018.

Swedish unemployment increased 0.2 percentage points to a 10-month high of 6.6% in August.

Icelandic wage inflation accelerated 0.2 percentage points to 2.1% in August.

Turkish retail sales in July were 3.1% greater than a year earlier. That was the slowest on-year advance since last November and down from a 10.8% jump between January of 2017 and January 2018.

Scheduled U.S. monthly data reports today are the housing index from the National Association of Home Builders and Treasury-compiled capital flows. Hungarian monetary authorities are reviewing their policy stance and will be announcing their decision later today.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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