Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Wave of Tsunami in Turkish Lira

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The Turkish lira fell to an all-time low against the dollar. The lira tumbled 15.63% against the dollar on friday to 6.4323 from the previous close. The currency — which has lost more than 40 per cent of its value this year — was 18.5 per cent lower at one point on Friday. Turkish stock market index – Borsa Istanbul 100 ended -2.23% at Friday close. Year to Date stock market index is down by 17.68%.

The steep decline in the Turkish currency came after the European Central Bank expressed concerns about potential contagion from Turkey’s problems, especially in the banking sector.

Goldman Sachs warned this week that a further drop in the Turkish lira to 7.1 versus the dollar could largely erode the country’s banks’ excess capital. “Incremental lira depreciation could increase capital concerns for banks, especially for ones with lower capital levels,” Goldman’s analysts said.

US President Mr Donald Trump last Friday announced on doubling of Tariffs on Steel and Aluminum

In response, Turkish President Recep Tayyip Erdogan said, “Don’t forget this: if they have dollars, we have our people, justice and God,” he said. “We will come out of the economic war successfully.” Recently he urged Turkish people to sell dollars and gold and buy lira.

The Financial Times reported that the European Central Bank is said to be concerned about the three lenders’ exposure to Turkey. Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, which all have significant operations in Turkey. The ECB is concerned about the risk that Turkish borrowers might not be hedged against the lira’s weakness and begin to default on foreign currency loans, which make up about 40 per cent of the Turkish banking sector’s assets.

Exposure to Turkey hits Europe’s biggest banking stocks hard on Friday. Italy’s UniCredit (UNCFF) shed 5.6% and Spanish lender BBVA (BFR) dropped 5.5%. France’s BNP Paribas (BNPQF) was off by 4.3% and Deutsche Bank (DB) fell 5.3% on Turkey contagion fears.

Dollar index on friday hits a 14 month high. This move could further ripple across emerging market currencies.

Euro drops below $1.14, lowest in 13mths on #Turkey contagion fears.

USDINR ended at 68.83 and fears that this ripple effect could spill into Monday trading as well.

Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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