Wednesday, August 15, 2018 18:51PM TheGuardianUK
Qatar has come to Turkey’s aid today, pledging to invest $15bn in the country to help it ride out its currency crisis. The offer came as Turkish president Erdoğan hosted Sheikh Tamim bin Hamad Al-Thani, emir of the Gulf state (photos).
Analysts believe the move will help Turkey ride out the crisis - with the money committed to helping the financial sector. In the long run, though, many investors are looking for conventional measures such as an interest rate hike.
Turkey has escalated the diplomatic row with the US today, by slapping hefty tariffs on American imports. Cars, spirits and beauty products will all become much more expensive, as Ankara retaliates against America’s metals tariffs.
Turkey has also taken steps to prevent traders betting against its currency. Financial regulators tightens the rules around foreign exchange derivatives, making it harder to ‘short’ the lira.
After days of heavy losses, the lira has staged a recovery. The currency has gained over 5% today to trade around 6 lira to the US dollar, compared with a record low of 7 earlier this week.
Fiona Cincotta of City Index says:
“The limits on shorting the Lira taken by Ankara have halted the slide in the currency, which has firmed over 4% after its 20% decline, easing contagion fears and cooling the threat on financials.
Whilst this is a short-term measure, its doing the trick for now. However, it was the more confrontational move by Ankara to raise tariffs on American cars, alcohol, cigarettes, escalating tensions with the US that has caught the market’s attention and increased flows into safe havens such as the Japanese Yen and Swiss Franc.”
Overall, global financial markets had a bad day as shares fell across Europe, and commodity prices were hit by worries over emerging markets - including Turkey and China.
Three factors are driving the markets down, says Charlie Robertson of Renaissance Capital -- the buoyant US dollar, America’s trade disputes, and the prospect of US interest rates going up.
He says (via Reuters)
“It is dollar strength, Trump’s trade wars and Fed tightening. They are an ugly combination for emerging markets.”
Robertson is also cautious about Qatar’s pledge to invest $15bn in Turkey - When will we actually see the money, and will it be invested sensibly?