Lira collapses as Erdogan tells Turks: They have 'their dollars,' we have 'our god'

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Samira

Illuminated Xalimo
https://www.cnbc.com/2018/08/10/lir...dogan-tells-turks-they-have-their-dollar.html

The Turkish lira has collapsed to an all-time low against the dollar, but the country's leader has brushed aside concerns, telling Turks "we have our God." The Turkish President Recep Erdogan then followed those comments up Friday by urging Turks to sell dollars and gold and buy lira.

At around 8:00 a.m. ET Friday, the lira had fallen to $7.081, an almost 11 percent loss for the session. It has since pared some losses. As recently as April one dollar bought about four Turkish lira.

The first wave of selling came early Friday after a Turkish delegation returned from the United States with apparently no progress on the detention of a U.S. pastor. The evangelist, Andrew Brunson, is charged with supporting a group blamed for an attempted coup in 2016.

President Donald Trump said in July that the U.S. would place "large sanctions" on the country for the pastor's detention. On Friday, Trump appeared to back that position up by posting on Twitter that he would double the level of tariffs on steel and aluminum to 20 percent and 50 percent respectively.

So far there has been no confirmation to CNBC of the policy from the United States Department of Commerce.

Late Thursday, and prior to Trump's tweet, Erdogan said he would stand up to pressure from the United States.

"There are various campaigns being carried out. Don't heed them," Erdogan said Thursday. "Don't forget, if they have their dollars, we have our people, our God. We are working hard. Look at what we were 16 years ago and look at us now," Erdogan told supporters.

On Friday afternoon Erdogan dug in again, calling for citizens to convert out of dollars and gold and buy the lira to help fight a "national struggle". In response, the currency renewed its sell-off. In his speech in the northeastern city of Bayburt, Erdogan added that he would decisively defend the country against economic attacks.

The lira's three-month implied volatility gauge hit its highest since late 2008. Implied volatility shows the market's opinion of the currency's potential moves. If the implied volatility is high, the market things the currency has potential for large price swings in either direction.

European bank concern
The euro dropped 0.5 percent against the dollar on Friday morning, following reports that the European Central Bank (ECB) is concerned over the impact of a weak Turkish lira on European banks.

According to the Financial Times, the lira's depreciation could hurt European banks such as Spain's BBVA, Italy's UniCredit, and France's BNP Paribas in particular.

Speaking to CNBC's "Squawk Box Europe" Friday, Timothy Ash said the FT report was "sensationalist" as any losses incurred by the banks would be by local subsidiary branches who had invested using Turkish lira and not U.S. dollars.

He added however that while banks in Turkey remained in reasonable shape, the country did have a problem with its balance of payments that has occurred because the economy had been allowed to overheat.

"Ultimately now, there is zero credibility in the Central Bank of Turkey and zero credibility in Turkish policy making. Whatever they do, the market doesn't believe them," Ash said.

Economic pressure
Turkey's economy is seen as particularly fragile due to its high level of debt that is priced in dollars. The more the lira weakens, the more expensive that debt becomes. The latest estimates from the International Monetary Fund (IMF) show that the total amount of Turkish debt payable in other currencies is more than 50 percent of the country's gross domestic product.

Inflation in the country has been rampant with consumer prices rising almost 16 percent in July alone. While the country's central bank has raised interest rates in the past to support the currency and quell inflation, the most recent meeting in July saw the Turkish central bank unexpectedly hold its benchmark interest rate at 17.75 percent. Erdogan has repeatedly insisted that rates should not be raised too high, triggering suggestions that the central bank doesn't act with full independence.

Berat Albayrak, Turkey's finance minister, is set to reveal "a new economic model" later Friday.
 
BBVA and Unicredit have huge exposure to the turkish market. Italian banks are really fragile atm, hope this doesn't lead to anything severe.
 
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Interesting

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European stocks extended their losses on Friday afternoon as the meltdown in the Turkish lira spurred concerns about an economic crisis that could rattle the European banking sector.

The Stoxx Europe 600 Index retreated as much as 1.1 percent, on track to post a weekly loss of 0.8 percent. BBVA fell 5.4 percent, UniCredit dropped 4.4 percent and BNP Paribas sank 4 percent. The Financial Times reported that the European Central Bank is said to be concerned about the three lenders’ exposure to Turkey. According to Bloomberg Intelligence, the key concern is the more than $130 billion exposure of European lenders to the Turkish non-bank private sector.

“There’s Turkish panic right now - so selling European banks is tough as it’s into the eye of the storm,” said John Roe, head of multi-asset funds at Legal & General Investment Management in London.

“As we have seen during the Greek debt crisis, financial markets are sufficiently interwoven that concerns over debt serviceability in one region can spread quite quickly within European banks, adding uncertainty to a sector that has already become less popular with investors as they struggle to see the ECB meaningfully raise rates this economic cycle,” said Edward Park, a London-based investment director at Brooks Macdonald.

Today’s selloff worsens the already negative performance of European banking shares this year, which are down 12 percent in 2018 amid disappointment the ECB will keep rates on hold until at least next summer. Investors continue to shun the region’s stocks, with European equity funds seeing outflows of $0.6 billion in the latest week, marking a 22nd straight week of redemptions, according to Bank of America Merrill Lynch strategists.

Italy’s UniCredit said it’s been “paying particular attention” to geopolitical risks in Turkey, where the tumbling lira is driving down the value of its local banking venture. UniCredit jointly controls Turkey’s Yapi Kredi Bankasi AS, part of a banking empire that sprawls over 14 countries, serving 25 million clients.
 
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European stocks extended their losses on Friday afternoon as the meltdown in the Turkish lira spurred concerns about an economic crisis that could rattle the European banking sector.

The Stoxx Europe 600 Index retreated as much as 1.1 percent, on track to post a weekly loss of 0.8 percent. BBVA fell 5.4 percent, UniCredit dropped 4.4 percent and BNP Paribas sank 4 percent. The Financial Times reported that the European Central Bank is said to be concerned about the three lenders’ exposure to Turkey. According to Bloomberg Intelligence, the key concern is the more than $130 billion exposure of European lenders to the Turkish non-bank private sector.

“There’s Turkish panic right now - so selling European banks is tough as it’s into the eye of the storm,” said John Roe, head of multi-asset funds at Legal & General Investment Management in London.

“As we have seen during the Greek debt crisis, financial markets are sufficiently interwoven that concerns over debt serviceability in one region can spread quite quickly within European banks, adding uncertainty to a sector that has already become less popular with investors as they struggle to see the ECB meaningfully raise rates this economic cycle,” said Edward Park, a London-based investment director at Brooks Macdonald.

Today’s selloff worsens the already negative performance of European banking shares this year, which are down 12 percent in 2018 amid disappointment the ECB will keep rates on hold until at least next summer. Investors continue to shun the region’s stocks, with European equity funds seeing outflows of $0.6 billion in the latest week, marking a 22nd straight week of redemptions, according to Bank of America Merrill Lynch strategists.

Italy’s UniCredit said it’s been “paying particular attention” to geopolitical risks in Turkey, where the tumbling lira is driving down the value of its local banking venture. UniCredit jointly controls Turkey’s Yapi Kredi Bankasi AS, part of a banking empire that sprawls over 14 countries, serving 25 million clients.

That infographic does not even take into account BBVA's stake in Garanti Bank :whoo:

This could get ugly :whew:
 

Blade1

Ashy Abdi Representative
740x-1.png


European stocks extended their losses on Friday afternoon as the meltdown in the Turkish lira spurred concerns about an economic crisis that could rattle the European banking sector.

The Stoxx Europe 600 Index retreated as much as 1.1 percent, on track to post a weekly loss of 0.8 percent. BBVA fell 5.4 percent, UniCredit dropped 4.4 percent and BNP Paribas sank 4 percent. The Financial Times reported that the European Central Bank is said to be concerned about the three lenders’ exposure to Turkey. According to Bloomberg Intelligence, the key concern is the more than $130 billion exposure of European lenders to the Turkish non-bank private sector.

“There’s Turkish panic right now - so selling European banks is tough as it’s into the eye of the storm,” said John Roe, head of multi-asset funds at Legal & General Investment Management in London.

“As we have seen during the Greek debt crisis, financial markets are sufficiently interwoven that concerns over debt serviceability in one region can spread quite quickly within European banks, adding uncertainty to a sector that has already become less popular with investors as they struggle to see the ECB meaningfully raise rates this economic cycle,” said Edward Park, a London-based investment director at Brooks Macdonald.

Today’s selloff worsens the already negative performance of European banking shares this year, which are down 12 percent in 2018 amid disappointment the ECB will keep rates on hold until at least next summer. Investors continue to shun the region’s stocks, with European equity funds seeing outflows of $0.6 billion in the latest week, marking a 22nd straight week of redemptions, according to Bank of America Merrill Lynch strategists.

Italy’s UniCredit said it’s been “paying particular attention” to geopolitical risks in Turkey, where the tumbling lira is driving down the value of its local banking venture. UniCredit jointly controls Turkey’s Yapi Kredi Bankasi AS, part of a banking empire that sprawls over 14 countries, serving 25 million clients.
Woah I did business at school so this is really intriguing. I'd give it a informative rating but I'm not allowed
 
Classic economic warfare from the west, they use this along with sanctions and IMF debt to enslave and subdue large parts of the world while they pillage and loot unabated.

Unlike other poor dirt countries sanctions & IMF debt instruments are not enough to enslave a powerful country like Turkey that is self sufficient & can fight back.

But the curse of Turkey is being exposed so heavily to this toxic western economic model, their heavy reliance upon it exposes them to the predatory speculators in the west who can crush them at will.

This is essentially low intensity economic warfare to get Erdogan to toe their line since various coup plots didn't work.

Much of Turkey's gold is still kept in Fort Knox like most other countries, they literally have Turkey by the balls.
 
Nobody messes with creditors

Any risk leads to higher interest rates

Good boys get low interest rates

Bad boys get a punishing rate

You end up digging a bigger hole you can’t eacape

Pay your debts in due

Only EU nations can play as they want because they pay the same rate , markets can be punishing
 
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