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Abu Dhabi, UAEWednesday 12 December 2018

Currency watch: Turkish lira, Indian rupee, euro, pound and more

Global jitters over the Turkey financial crisis and political uncertainty over Brexit. Follow the key updates here

People stand next to a digital billboard giving updates on currencies and the Turkish stock exchange in Istanbul. AFP
People stand next to a digital billboard giving updates on currencies and the Turkish stock exchange in Istanbul. AFP

Emerging market jitters continued as volatility brought on by the financial crisis in Turkey escalated over the past week.

Key currency news:

  • The Turkish lira strengthened to 6.53 to the dollar, from a low of 7.24
  • The euro fell on fears of contagion to €0.88
  • The pound was trading at £0.78 to the dollar
  • The South African rand is trading at 14.15, amid fears of emerging market contagion
  • The Indian rupee hit a record low of 70 against the dollar, strengthening slightly during the day, returning to 70
  • The Russian rouble is trading at 66.59

Last updated at 5:25pm

This article will be updated periodically with key news and developments below:

Turkish lira

The lira rebounded 6 per cent following the Turkish central bank's pledge to provide liquidity in response to the meltdown.

Turkey's central bank said it was ready to take 'all necessary measures" to ensure financial stability, promising to provide the banks with liquidity.

The bank also revised reserve requirement ratios for banks, helping to stave off further liquidity issues.

Investors were reassured by the news that Finance Minister Berat Albayrak, son-in-law of President Erdogan, would hold a conference call with about 1,000 investors from the United States, Europe and the Middle East on Thursday.

A tourist takes a photograph on a smartphone near a foreign currency exchange store in Istanbul. Bloomberg
A tourist takes a photograph on a smartphone near a foreign currency exchange store in Istanbul. Bloomberg

In early trading on Tuesday, the currency appreciated for the first time in five days, about 4 per cent from its previous low, and Turkish stocks rebounded, rising 2.2 per cent at market open in Istanbul.

But investors still remain cautious as they assess their exposure to a weak currency. The lira dropped to as low as 7.24 against the dollar on Monday, despite previous central bank efforts to stabilise the currency.

The lira lost about a quarter of its value against the dollar as the US row with President Recep Tayyip Erdogan’s government over the detention of an American pastor worsened last week.

The fall out showed no signs of abating as US President Donald Trump approved doubling tariffs on Turkish steel and aluminium. Meanwhile, Mr Erdogan said Turkey will boycott US electronic goods. The escalation dented investor confidence in the Middle East’s largest economy as a threat of a full-blown financial crisis looms large over Turkey and it reverberates across emerging markets.

Read more: Qatar National Bank sinks on Turkey exposure

Turkey’s central bank introduced a range of measures on Monday in the hope of managing liquidity and restoring stability to financial markets. The regulator said it will “take all necessary measures” and eased rules that govern how commercial banks in the country manage their lira and foreign currency liquidity.

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Euro

AFP
AFP

The currency fell on fears of exposure to Turkish markets, but it later rebounded from lows, although, fears of contagion are still present. Turkey's relatively small contribution to global GDP, $900bn or 1 per cent, reduces the risk of contagion. Banks will be assessing their exposure to a weak Turkish lira.

Spanish banks are thought to have the largest exposure to Turkish assets, French and Italian banks are the next most exposed.

The eurozone has a €1bn per month surplus with Turkey, but these exports are only half a percentage point of the eurozone GDP.

Read more: UAE residents cash in as tumbling euro and rupee sparks buying boost

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Pound sterling

Uncertainty surrounding Brexit has weakened the sterling pound this week.

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South African Rand

The Rand recorded its steepest drop against the dollar in two years but rebounded 2.4 per cent after fears of contagion and a total collapse of the currency subsided.

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Indian Rupee

Asia's worst performing currency dropped to an all-time low. The currency rebounded slightly, but the rupee's poor performance has put pressure on the Reserve Bank of India for more interest rate measures.

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