Analysts at ANZ Bank New Zealand Limited explained that Turkey remained the key focus for markets with emerging markets feeling contagion pain.
Key Quotes:
“USD/TRY rose another 8%, trading above 7.00 at times, maintaining the risk-off tone.”
“Argentina raised its 7-day rate 500bps to 45%, but was unable to reverse a 3% decline in ARS.”
“The USD strengthened across the G10 with JPY and CHF the only currencies appreciating given the safe-haven bid. US Treasury yields were little changed while yields in the periphery of Europe rose sharply.”
“Italian yields rose 10-18bps across the curve with yields in Spain up 4-6bps. Stocks struggled with key European indices flat to down 0.5%.”
“Key US equities were down 0.1-0.4% at the time of writing. Commodities softened, with the CRB index down 0.7% and oil down 0.5%. Surprisingly, gold fell 1.5%.”
“Turkish authorities took their first steps to stem the lira decline. However, the initial action was deemed insufficient by the market.”
“The central bank pledged to “support financial stability and proper functioning of markets” with revised discount rates, higher FX deposit limits, additional repo auctions, and extended the maturity of FX borrowings to one month.”
“Emerging markets were caught in the crosswinds with Argentina, South Africa, and some other South American markets feeling the pain too. Lira is now down 84% YTD.”
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