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Abu Dhabi, UAEWednesday 12 December 2018

Turkish lira slumps further in first trading after holiday

UPDATE: Embattled currency drops as Turks return to work and dollar remains strong

Lira has fallen again as greenback remains buoyant. Reuters
Lira has fallen again as greenback remains buoyant. Reuters

UPDATE: The Turkish lira tumbled nearly 5 per cent against the dollar on Monday after a week-long holiday, weakening as far as 6.2960. It stood at 6.21 at around 4pm UAE time.

Investors are set to turn their attention to a meeting between Finance Minister Berat Albayrak and his French counterpart in Paris, after which they are scheduled to make a statement at 5.30pm UAE time.

Earlier the lira slid 3 per cent against the dollar on Monday as local markets resumed trading after a week-long holiday and investors focused again on a bitter dispute between Ankara and Washington over an American pastor being tried in Turkey.

With the dollar stronger globally, the lira weakened as far as 6.19 from a close of 6 on Friday. It has lost nearly 39 per cent of its value against the US currency this year, Reuters said.

As Turks return to work after a long holiday there are other reasons for investors to shun riskier assets. The trade skirmish between the US and China may get uglier.

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“Fragile currencies including the Brazilian real, Turkish lira and Russian rouble are likely to stay under pressure, dissuading US investors from diversifying their portfolios into higher-yielding emerging markets,” said Mansoor Mohi-uddin, the head of foreign-exchange strategy at NatWest Markets in Singapore.

Options traders were last week the most bearish on the lira, South African rand, rouble and real in emerging markets, according to one-month risk reversals – even as developing-nation currencies gained. A Bloomberg currency index that measures carry-trade returns from eight emerging markets, funded by short positions in the dollar, has slumped 4.9 per cent since the end of July, set for its biggest monthly drop since November 2016.

Traders should brace for more turbulence unless the nation’s policymakers adopt a more market-friendly approach, EPFR Global strategists said.