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Turkish financial crisis: Lira hits record low as Erdoğan says 'attacks will continue' – as it happened Turkish financial crisis: Lira hits record low as Erdoğan says 'attacks will continue' – as it happened
(about 1 hour later)
The US stock market has close down lower tonight, as the Turkey crisis weighted on sentiment.
The Dow shed 125 points, or 0.5%, to finish at 25,187.
The wider S&P 500 lost 0.4%.
Energy companies led the sell off, dropping by 1.2%. Banks and miners lost 1%, reflecting worries that the lira crisis could create financial turmoil and dent economic demand.
After a busy day, here’s our economics editor Larry Elliott on the Turkish crisis:After a busy day, here’s our economics editor Larry Elliott on the Turkish crisis:
A fresh plunge in the Turkish lira sent tremors through global currency markets on Monday, amid fears that the failure of Recep Tayyip Erdogan’s government to tackle its worsening financial crisis would have a domino effect on other vulnerable countries.A fresh plunge in the Turkish lira sent tremors through global currency markets on Monday, amid fears that the failure of Recep Tayyip Erdogan’s government to tackle its worsening financial crisis would have a domino effect on other vulnerable countries.
The Argentine peso and the South African rand were the biggest knock-on casualties of a day of turbulence that saw the lira fall 8% against the dollar and Erdogan lash out at “economic terrorists on social media”, as he accused Donald Trump of stabbing Turkey in the back.The Argentine peso and the South African rand were the biggest knock-on casualties of a day of turbulence that saw the lira fall 8% against the dollar and Erdogan lash out at “economic terrorists on social media”, as he accused Donald Trump of stabbing Turkey in the back.
But the Turkish president’s insistence that his country would survive an economic siege failed to reassure financial markets alarmed at the possible collapse of the strategically-vital emerging market country.But the Turkish president’s insistence that his country would survive an economic siege failed to reassure financial markets alarmed at the possible collapse of the strategically-vital emerging market country.
Concerns that the 45% drop in the value of the lira this year would prove ruinous for companies that had borrowed heavily in foreign currencies prompted the renewed sell off of the lira and pushed up the cost of servicing Turkey’s budget deficit.Concerns that the 45% drop in the value of the lira this year would prove ruinous for companies that had borrowed heavily in foreign currencies prompted the renewed sell off of the lira and pushed up the cost of servicing Turkey’s budget deficit.
Erdogan insisted that the Turkish economy was fundamentally sound and attacked the US president for imposing sanctions and doubling tariffs on Turkey’s steel and aluminium imports last week over the house arrest of an American pastor, Andrew Brunson, on disputed terrorism charges.Erdogan insisted that the Turkish economy was fundamentally sound and attacked the US president for imposing sanctions and doubling tariffs on Turkey’s steel and aluminium imports last week over the house arrest of an American pastor, Andrew Brunson, on disputed terrorism charges.
“We are together in NATO and then you stab your strategic partner in the back,” Erdogan said as he came under pressure from the markets to respond to the lira’s fall and an inflation rate of more than 15%.“We are together in NATO and then you stab your strategic partner in the back,” Erdogan said as he came under pressure from the markets to respond to the lira’s fall and an inflation rate of more than 15%.
Here’s the full story:Here’s the full story:
My colleague Martin Chulov has discovered that the lira crisis has been fuelled by a misunderstanding between the leaders of the US and Turkey.My colleague Martin Chulov has discovered that the lira crisis has been fuelled by a misunderstanding between the leaders of the US and Turkey.
He writes:He writes:
The currency plunge imperilling Turkey’s economy has been fuelled by a standoff between Donald Trump and Recep Tayyip Erdoğan over the fate of a Turkish woman detained in Israel whose freedom the US president brokered, and an American pastor held in Turkey whose release he demands in return, officials in Ankara claim.The currency plunge imperilling Turkey’s economy has been fuelled by a standoff between Donald Trump and Recep Tayyip Erdoğan over the fate of a Turkish woman detained in Israel whose freedom the US president brokered, and an American pastor held in Turkey whose release he demands in return, officials in Ankara claim.
Those officials say that Trump may have ‘misinterpreted’ a discussion with Erdoğan over the pair - Turkish woman Ebru Özkan, jailed for alleged links to Hamas (but released last month), and Andrew Brunson, a preacher from North Carolina.Those officials say that Trump may have ‘misinterpreted’ a discussion with Erdoğan over the pair - Turkish woman Ebru Özkan, jailed for alleged links to Hamas (but released last month), and Andrew Brunson, a preacher from North Carolina.
It appears that Trump thought he had reached a deal for Brunson’s release, while Erdoğan believed he’d agreed to transfer the pastor to house arrest (as happened in July).It appears that Trump thought he had reached a deal for Brunson’s release, while Erdoğan believed he’d agreed to transfer the pastor to house arrest (as happened in July).
Martin explains:Martin explains:
“It took place on the margins of the Nato summit,” the source told the Guardian.“It took place on the margins of the Nato summit,” the source told the Guardian.
“Erdoğan asked Trump for help with the lady in prison in Israel. There was only the two of them and a translator. Trump said: ‘I need some traction on the pastor first’. When Erdoğan said OK he meant that we are working on it. Then [US vice-president Mike] Pence, due to midterm election considerations, messed things up. Trump confused a process for an agreement.”“Erdoğan asked Trump for help with the lady in prison in Israel. There was only the two of them and a translator. Trump said: ‘I need some traction on the pastor first’. When Erdoğan said OK he meant that we are working on it. Then [US vice-president Mike] Pence, due to midterm election considerations, messed things up. Trump confused a process for an agreement.”
That might explains why the White House has taken such a tough line on Turkey this week, imposing new sanction and starting the process to double tariffs on steel and aluminium.That might explains why the White House has taken such a tough line on Turkey this week, imposing new sanction and starting the process to double tariffs on steel and aluminium.
One late newsflash: Argentina’s central bank has raised its benchmark interest rate to a blistering 45% (!), from 40%.One late newsflash: Argentina’s central bank has raised its benchmark interest rate to a blistering 45% (!), from 40%.
As explained earlier, the peso hit a record low as the Turkish crisis rocked emerging market currencies (and as a political scandal continued to shake confidence).As explained earlier, the peso hit a record low as the Turkish crisis rocked emerging market currencies (and as a political scandal continued to shake confidence).
This rate hike is aimed at preventing the peso plunging even further, and suggest Buenos Aires is concerned that the markets could become more volatile in the days ahead.This rate hike is aimed at preventing the peso plunging even further, and suggest Buenos Aires is concerned that the markets could become more volatile in the days ahead.
Argentina central bank unexpectedly raises key rate to 45% https://t.co/mxDOPLtahn pic.twitter.com/RcnIVaIZEFArgentina central bank unexpectedly raises key rate to 45% https://t.co/mxDOPLtahn pic.twitter.com/RcnIVaIZEF
Time for a recapTime for a recap
The currency crisis gripping Turkey has deepened today, sending ripples through the financial world and hurting emerging market countries across the globe.The currency crisis gripping Turkey has deepened today, sending ripples through the financial world and hurting emerging market countries across the globe.
Fears over Turkey’s financial position sent its currency spiralling to a fresh record low, hitting 7.2 lira to the US dollar. The lira has now lost a third of its value in the last week, as the crisis has escalated alarmingly.Fears over Turkey’s financial position sent its currency spiralling to a fresh record low, hitting 7.2 lira to the US dollar. The lira has now lost a third of its value in the last week, as the crisis has escalated alarmingly.
Turkey’s stock market also had a rough day, with bank shares tumbling by over 10%. Economists fear that Turkish companies will struggle to repay loans priced in dollars, given the lira’s plunge in value.Turkey’s stock market also had a rough day, with bank shares tumbling by over 10%. Economists fear that Turkish companies will struggle to repay loans priced in dollars, given the lira’s plunge in value.
Contagion caused jitters elsewhere too, with India’s rupee and Argentina’s peso dropping to record lows. The Russian rouble and the South African rand hit levels not seen since 2016.Contagion caused jitters elsewhere too, with India’s rupee and Argentina’s peso dropping to record lows. The Russian rouble and the South African rand hit levels not seen since 2016.
A cocktail of problems are to blame, from Turkey’s surging inflation rate and current account deficit to the diplomatic row with America that means the Turkish economy faces punishing sanctions.A cocktail of problems are to blame, from Turkey’s surging inflation rate and current account deficit to the diplomatic row with America that means the Turkish economy faces punishing sanctions.
Investors believe that Turkey needs to take decisive action, such as hiking interest rates from their current level of 17.75% to an even more painful rate - perhaps over 27%.Investors believe that Turkey needs to take decisive action, such as hiking interest rates from their current level of 17.75% to an even more painful rate - perhaps over 27%.
President Recep Tayyip Erdoğan is refusing to bow to pressure from the markets, though.President Recep Tayyip Erdoğan is refusing to bow to pressure from the markets, though.
He told an audience of ambassadors in Ankara that Turkey was under attack from overseas interests:He told an audience of ambassadors in Ankara that Turkey was under attack from overseas interests:
“The developments over recent weeks have shown that Turkey is under siege.“The developments over recent weeks have shown that Turkey is under siege.
It is clear that these attacks will continue for a while.”It is clear that these attacks will continue for a while.”
Erdoğan also blasted US sanctions against its NATO ally, calling them a “stab in the back against Turkey.”Erdoğan also blasted US sanctions against its NATO ally, calling them a “stab in the back against Turkey.”
Turkey’s central bank has taken some steps to prop up the lira. It has pledged to “provide all the liquidity the banks need”, which should help them to keep providing loans to people and businesses.Turkey’s central bank has taken some steps to prop up the lira. It has pledged to “provide all the liquidity the banks need”, which should help them to keep providing loans to people and businesses.
Delphine Arrighi, fund manager at Old Mutual Global Investors, argues that borrowing costs must rise to prevent the lira plunging to fresh depths.Delphine Arrighi, fund manager at Old Mutual Global Investors, argues that borrowing costs must rise to prevent the lira plunging to fresh depths.
“Other options could include capital controls, which seem more likely than an appeal to the IMF, but that would certainly not be the least painful and would most likely precipitate a recession while postponing the return of portfolio inflows.“Other options could include capital controls, which seem more likely than an appeal to the IMF, but that would certainly not be the least painful and would most likely precipitate a recession while postponing the return of portfolio inflows.
Hence a sizable rate hike followed by drastic measures of fiscal consolidation still appear as the most viable option to re-anchor the lira and pull the Turkish economy from the brink.Hence a sizable rate hike followed by drastic measures of fiscal consolidation still appear as the most viable option to re-anchor the lira and pull the Turkish economy from the brink.
Turkish authorities have also launched a crackdown against social media accounts, which it blames for spreading ‘fake news’ and undermining confidence in the economy.Turkish authorities have also launched a crackdown against social media accounts, which it blames for spreading ‘fake news’ and undermining confidence in the economy.
Even German chancellor Angela Merkel has weighed in, saying she hoped Turkey could be economically prosperous. She also called for Turkey’s central bank to be properly independent -- a touchy subject, as Erdoğan has been pushing it not to raise interest rates.Even German chancellor Angela Merkel has weighed in, saying she hoped Turkey could be economically prosperous. She also called for Turkey’s central bank to be properly independent -- a touchy subject, as Erdoğan has been pushing it not to raise interest rates.
There are fears that currency speculators could drive Turkey deeper into the crisis in the days ahead:There are fears that currency speculators could drive Turkey deeper into the crisis in the days ahead:
And on the streets of Turkey, people have spoken of their concerns as import prices jump and the value of their savings shrinks.And on the streets of Turkey, people have spoken of their concerns as import prices jump and the value of their savings shrinks.
One told the Guardian:One told the Guardian:
“We don’t really understand any of it. I think it’s political. Erdoğan argues with Trump, and we end up trapped in a corner.”“We don’t really understand any of it. I think it’s political. Erdoğan argues with Trump, and we end up trapped in a corner.”
“We can just pray to God,” he added.“We can just pray to God,” he added.
The US stock market is heading lower, as worries over Turkey ripple weigh on Wall Street.The US stock market is heading lower, as worries over Turkey ripple weigh on Wall Street.
Banks are bearing the brunt, with Goldman Sachs and JP Morgan both down around 1%.Banks are bearing the brunt, with Goldman Sachs and JP Morgan both down around 1%.
Traders remain worried that the Turkish crisis will escalate, unless Ankara takes more decisive steps - such as an interest rate hike.Traders remain worried that the Turkish crisis will escalate, unless Ankara takes more decisive steps - such as an interest rate hike.
A bit more from Ed Conway:A bit more from Ed Conway:
Then the final straw last wk: Donald Trump intervening with sanctions on Turkish steel/aluminium. Why? Again it comes back to the coup and in this case Erdogan's decision to detain that American pastor. It was that US intervention which caused the VERY sudden fall in the lira 8/ pic.twitter.com/k5TlLdAe6GThen the final straw last wk: Donald Trump intervening with sanctions on Turkish steel/aluminium. Why? Again it comes back to the coup and in this case Erdogan's decision to detain that American pastor. It was that US intervention which caused the VERY sudden fall in the lira 8/ pic.twitter.com/k5TlLdAe6G
How does this end? Prob Erdogan will have to endorse higher int rates & lower govt spending or there's a good chance the crisis intensifies, which may mean an IMF bailout. There's talk of capital controls but they're rarely more than a sticking plaster solution in these crises 9/How does this end? Prob Erdogan will have to endorse higher int rates & lower govt spending or there's a good chance the crisis intensifies, which may mean an IMF bailout. There's talk of capital controls but they're rarely more than a sticking plaster solution in these crises 9/
What abt knock-on consequences? Some EU banks exposed. Esp BBVA & Unicredit. Couple of useful tables on this attached. BUT NB much of their lending is in lira so contagion risk not quite as bad as in Greek crisis 10/Yes I know I said it was a "short thread". I was wrong. Sorry pic.twitter.com/FD3yQfZ3LLWhat abt knock-on consequences? Some EU banks exposed. Esp BBVA & Unicredit. Couple of useful tables on this attached. BUT NB much of their lending is in lira so contagion risk not quite as bad as in Greek crisis 10/Yes I know I said it was a "short thread". I was wrong. Sorry pic.twitter.com/FD3yQfZ3LL
More broadly, we're probably likely to see more of these crisis in emerging economies as the US Federal Reserve raises interest rates, making life for all dollar-exposed economies much more difficult. That was at least part of Turkey's problem... 11/More broadly, we're probably likely to see more of these crisis in emerging economies as the US Federal Reserve raises interest rates, making life for all dollar-exposed economies much more difficult. That was at least part of Turkey's problem... 11/
The most ironic thing abt Turkey's current crisis is that so many of the root causes (not all but many) can be traced back to aftermath of the 2016 coup. Pres Erdogan may have survived that coup but it's by no means guaranteed that he will survive all the aftershocks...The most ironic thing abt Turkey's current crisis is that so many of the root causes (not all but many) can be traced back to aftermath of the 2016 coup. Pres Erdogan may have survived that coup but it's by no means guaranteed that he will survive all the aftershocks...
After a day of heavy losses, Turkey’s stock exchange has closed deep in the red with the benchmark BIST 100 index losing 2.4%.After a day of heavy losses, Turkey’s stock exchange has closed deep in the red with the benchmark BIST 100 index losing 2.4%.
Financial stocks felt the full blast of the currency crisis, with some bank stocks falling by over 10%.Financial stocks felt the full blast of the currency crisis, with some bank stocks falling by over 10%.
The slump is even worse if you adjust for the depreciation of the lira, points out Sky News’s Ed Conway in this thread about the situation in Turkey:The slump is even worse if you adjust for the depreciation of the lira, points out Sky News’s Ed Conway in this thread about the situation in Turkey:
Short thread on what's going on in Turkey, and whether it matters for the rest of us. The country looks like it's in the early stages of a currency crisis. Stock market is (in $ terms at least) down to the lowest level in nearly a decade 1/ pic.twitter.com/Al8qFeXJV0Short thread on what's going on in Turkey, and whether it matters for the rest of us. The country looks like it's in the early stages of a currency crisis. Stock market is (in $ terms at least) down to the lowest level in nearly a decade 1/ pic.twitter.com/Al8qFeXJV0
In some senses, Turkey was always a candidate for a crisis like this. It had some (if not all) of the ingredients. The biggest current acc deficit in the developed world. And the highest inflation rate... 2/ pic.twitter.com/9V9ncdElWbIn some senses, Turkey was always a candidate for a crisis like this. It had some (if not all) of the ingredients. The biggest current acc deficit in the developed world. And the highest inflation rate... 2/ pic.twitter.com/9V9ncdElWb
Turkey is one of the most exposed countries in the world to fluctuations in the dollar as it has enormous amts of dollar debt. That means any fall in the lira has major knock-on consequences. Useful chart on that here from the IIF: 3/ pic.twitter.com/haOXERvNXcTurkey is one of the most exposed countries in the world to fluctuations in the dollar as it has enormous amts of dollar debt. That means any fall in the lira has major knock-on consequences. Useful chart on that here from the IIF: 3/ pic.twitter.com/haOXERvNXc
Turkey has rubbed along OK despite some mildly scary economic traits for a while, so why a crisis now? In part the story goes back to the attempted coup of July 2016. Following that, Pres Erdogan doubled down on what some call populist/authoritarian policies 4/Turkey has rubbed along OK despite some mildly scary economic traits for a while, so why a crisis now? In part the story goes back to the attempted coup of July 2016. Following that, Pres Erdogan doubled down on what some call populist/authoritarian policies 4/
He jailed more political opponents (inc an American pastor he sees as partly culpable for the coup), he started to splurge a lot of public money to create an economic boom. And boy did he succeed. Turkey is now at the very point when boom turns to bust... 5/He jailed more political opponents (inc an American pastor he sees as partly culpable for the coup), he started to splurge a lot of public money to create an economic boom. And boy did he succeed. Turkey is now at the very point when boom turns to bust... 5/
The Turkish central bank should have raised interest rates ages ago to bring the boom to an end. But (continuing the populist/authoritarian theme) Erdogan has said explicitly that it should not. Striking example of that in this Bloomberg i/v from May https://t.co/bNkiatSUyU 6/ pic.twitter.com/VEOYjwPIetThe Turkish central bank should have raised interest rates ages ago to bring the boom to an end. But (continuing the populist/authoritarian theme) Erdogan has said explicitly that it should not. Striking example of that in this Bloomberg i/v from May https://t.co/bNkiatSUyU 6/ pic.twitter.com/VEOYjwPIet
Our economics editor Larry Elliott has written a new Q&A on the Turkish crisis. Here’s a flavour:Our economics editor Larry Elliott has written a new Q&A on the Turkish crisis. Here’s a flavour:
What are the implications for the global economy?What are the implications for the global economy?
The direct impact of what looks like an inevitable recession in Turkey would be relatively small because, despite a population of 80 million and strong growth in recent years, the country accounts for only 1% of global GDP. Eurozone countries run a trade surplus with Turkey but it is small. In the two previous Turkish financial crises since the turn of the millennium, European exporters have been able to divert their business to other markets. The European Central Bank has expressed concern about potential contagion through the eurozone banking system, with Spain, followed by Italy, the most heavily exposed countries.The direct impact of what looks like an inevitable recession in Turkey would be relatively small because, despite a population of 80 million and strong growth in recent years, the country accounts for only 1% of global GDP. Eurozone countries run a trade surplus with Turkey but it is small. In the two previous Turkish financial crises since the turn of the millennium, European exporters have been able to divert their business to other markets. The European Central Bank has expressed concern about potential contagion through the eurozone banking system, with Spain, followed by Italy, the most heavily exposed countries.
A bigger danger is that Turkey’s crisis will spill over into other emerging market economies and there were signs on Monday that other countries seen as vulnerable were coming under speculative attack. Turkey’s problems are particularly acute because it has more than $300bn of dollar-denominated corporate debt, which is getting more expensive to finance by the day. However, other countries – such as Mexico and South Africa - also took advantage of low US interest rates in the years after the financial crisis to borrow heavily in dollars and saw their currencies coming under pressure. The fear is of a full-blown emerging market crisis.A bigger danger is that Turkey’s crisis will spill over into other emerging market economies and there were signs on Monday that other countries seen as vulnerable were coming under speculative attack. Turkey’s problems are particularly acute because it has more than $300bn of dollar-denominated corporate debt, which is getting more expensive to finance by the day. However, other countries – such as Mexico and South Africa - also took advantage of low US interest rates in the years after the financial crisis to borrow heavily in dollars and saw their currencies coming under pressure. The fear is of a full-blown emerging market crisis.
The lira is weakening in late trading, and is threatening to plunge back the 7 lira-to-the-US dollar mark to a new all-time low.The lira is weakening in late trading, and is threatening to plunge back the 7 lira-to-the-US dollar mark to a new all-time low.
Andy Birch, principal economist at IHS Markit, fears the lira will keep tumbling until Turkey raises interest rates:Andy Birch, principal economist at IHS Markit, fears the lira will keep tumbling until Turkey raises interest rates:
The changes to reserve requirements in recent days and the government’s unspecified action plan has done little to stabilize the lira. Significantly more than just official promises of action are needed to exit the current crisis. IHS Markit continues to believe that the most immediate step to be taken to rescue the lira is a sharp central bank rate rise.The changes to reserve requirements in recent days and the government’s unspecified action plan has done little to stabilize the lira. Significantly more than just official promises of action are needed to exit the current crisis. IHS Markit continues to believe that the most immediate step to be taken to rescue the lira is a sharp central bank rate rise.
If this step is taken in conjunction with a shifting of government rhetoric, the plunge of the lira could pause and portfolio investment outflows may slow.If this step is taken in conjunction with a shifting of government rhetoric, the plunge of the lira could pause and portfolio investment outflows may slow.
Turkish citizens are struggling to cope with the impact of the lira’s astonishing losses in recent days, report Kareem Shaheen and Gokce Saracoglu in Istanbul.Turkish citizens are struggling to cope with the impact of the lira’s astonishing losses in recent days, report Kareem Shaheen and Gokce Saracoglu in Istanbul.
Some fear their businesses could shut down, while others who support the president say they will buy domestic products and shun goods from abroad. Those who cater to tourists, however, hope that the decline in the value of the currency will bring more foreign holidaymakers to the country. All declined to give their full names.Some fear their businesses could shut down, while others who support the president say they will buy domestic products and shun goods from abroad. Those who cater to tourists, however, hope that the decline in the value of the currency will bring more foreign holidaymakers to the country. All declined to give their full names.
“Go your way, nothing will happen to this country, I’ve seen the lira much lower than this in the 1990s,” said one foreign exchange office worker. Money-changing offices in Istanbul were selling dollars at a much higher rate than the banks on Monday, however, saying the fluctuation in the currency’s value was so unstable as to render the price they set meaningless.“Go your way, nothing will happen to this country, I’ve seen the lira much lower than this in the 1990s,” said one foreign exchange office worker. Money-changing offices in Istanbul were selling dollars at a much higher rate than the banks on Monday, however, saying the fluctuation in the currency’s value was so unstable as to render the price they set meaningless.
One vegetable and fruit seller said he had been forced to raise the price of imported products. A kilogram of bananas that cost 10 lira last week was now 15 lira.One vegetable and fruit seller said he had been forced to raise the price of imported products. A kilogram of bananas that cost 10 lira last week was now 15 lira.
“We need to send Erdoğan away,” he said.“We need to send Erdoğan away,” he said.
While ordinary Turks struggle to absorb the effects of high inflation and a declining currency, some foreigners who earn salaries in dollars and tourists are buying up luxury items. Pictures on social media over the weekend showed queues of foreigners outside stores such as Luis Vuitton and Chanel.While ordinary Turks struggle to absorb the effects of high inflation and a declining currency, some foreigners who earn salaries in dollars and tourists are buying up luxury items. Pictures on social media over the weekend showed queues of foreigners outside stores such as Luis Vuitton and Chanel.
“A lot of tourists, especially Arabs, buy from our store,” said the manager of a high-end design store in Galata. “But every 15 days we have to buy new supplies from Europe.“A lot of tourists, especially Arabs, buy from our store,” said the manager of a high-end design store in Galata. “But every 15 days we have to buy new supplies from Europe.
Here’s their full report:Here’s their full report:
European stock markets have closed in the red, as Turkish worries weigh on shares.European stock markets have closed in the red, as Turkish worries weigh on shares.
Britain’s FTSE 100 shed 24 points, or 0.3%, to end the day at 7642.Britain’s FTSE 100 shed 24 points, or 0.3%, to end the day at 7642.
Holiday firm TUI was the worst-performing stock on the Footsie, losing 2.5%. Last week, it revealed it was taking a financial hit on euro-denominated loans taken out to fund hotel building in Turkey. The lira’s losses push up the cost of repaying that debt.Holiday firm TUI was the worst-performing stock on the Footsie, losing 2.5%. Last week, it revealed it was taking a financial hit on euro-denominated loans taken out to fund hotel building in Turkey. The lira’s losses push up the cost of repaying that debt.
European banks with exposure to the Turkish economy also had a bad day. Spain’s BBVA lost 3.2% while Unicredit shed 2.5%.European banks with exposure to the Turkish economy also had a bad day. Spain’s BBVA lost 3.2% while Unicredit shed 2.5%.
Argentina has been hit by the anxiety rippling through the financial markets today.Argentina has been hit by the anxiety rippling through the financial markets today.
The peso has fallen to a record low, at around 30 pesos to the US dollar. Back in April it was trading around the 20 mark, before a slump in market confidence forced Buenos Aires to seek a bailout from the International Monetary Fund.The peso has fallen to a record low, at around 30 pesos to the US dollar. Back in April it was trading around the 20 mark, before a slump in market confidence forced Buenos Aires to seek a bailout from the International Monetary Fund.
#Argentina's peso falls to record low of 30 per USD amid anxiety about IMF program & widening corruption probe of Kirchner government. A vulnerability scorecard by @economics shows the nation is most at risk of contagion from Turkish market tumble. https://t.co/mGv9nwdVQN pic.twitter.com/NuF4c8hQT9#Argentina's peso falls to record low of 30 per USD amid anxiety about IMF program & widening corruption probe of Kirchner government. A vulnerability scorecard by @economics shows the nation is most at risk of contagion from Turkish market tumble. https://t.co/mGv9nwdVQN pic.twitter.com/NuF4c8hQT9
The peso is also being driven down by an unfolding scandal involving alleged bribes made to former officials of the Kirchner government (which was in power until 2015).The peso is also being driven down by an unfolding scandal involving alleged bribes made to former officials of the Kirchner government (which was in power until 2015).
More than a dozen business people have been arrested, after it emerged that the chauffeur of a former government official had kept diaries which allege to show payments totalling millions of dollars. The ongoing investigation has also hit share and bond prices, as traders wonder whether more executives, or politicians, will be dragged in.More than a dozen business people have been arrested, after it emerged that the chauffeur of a former government official had kept diaries which allege to show payments totalling millions of dollars. The ongoing investigation has also hit share and bond prices, as traders wonder whether more executives, or politicians, will be dragged in.
Despite today’s drama, currency exchange offices have been operating as normal in Turkey today.Despite today’s drama, currency exchange offices have been operating as normal in Turkey today.
Here are some photos from Istanbul:Here are some photos from Istanbul:
While the slump in the lira is bad news for Turkish citizens, it’s something of a boon for tourists. For example, one pound is now worth 8.8 lira -- compared to just 4.5 lira a year ago.While the slump in the lira is bad news for Turkish citizens, it’s something of a boon for tourists. For example, one pound is now worth 8.8 lira -- compared to just 4.5 lira a year ago.
That makes Turkey an attractive destination for Brits, driving down the cost of accommodation and food.That makes Turkey an attractive destination for Brits, driving down the cost of accommodation and food.