Led by Turkish Lira, Emerging-Market Currencies Shake Off Coup Jitters
The Turkish lira rose against the U.S. dollar Monday, partially recovering from its largest one-day drop in nearly eight years as Turkey’s government reasserted control of the country after a failed coup.
The lira gained 2.1% to 2.9573 per U.S. dollar. The currency, which trades around the clock though with poor liquidity during the Asian market hours, had dropped 4.7% Friday as the attempted military takeover unfolded. Friday marked the lira’s largest one-day decline against the dollar since October 2008. For the year, the lira has dropped 1.4% against the U.S. dollar.
Monday brought a broad reversal of Friday’s moves across the currency markets, suggesting that the fallout could be capped for now. Some emerging-market currencies that fell along with the lira Friday, including the South African rand and Mexican peso, clawed back losses. The Japanese yen, which is considered a safe haven, weakened after rising Friday amid the turmoil in Turkey.
“The fact that the coup failed is part of it.…It looks like President [Recep Tayyip] Erdogan has crushed the coup and got things under control, which has alleviated the worst of the concerns somewhat,” said Khoon Goh, head of Asia research at ANZ Bank in Singapore.
The euro rose 0.2% against the U.S. dollar Monday after falling 0.8% Friday. Germany, Europe’s biggest economy, is the biggest market for Turkish exports and the largest source of tourists, according to ING.
Emerging-market currencies in Asia that tend to be more vulnerable to bouts of political instability shook off news of the failed coup. The Malaysian ringgit rose slightly against the U.S. dollar Friday and fell Monday, driven by weakness in the Chinese yuan, which was fixed at its lowest level in nearly six years.
“If investors were to start to have a bigger look at political risk factors in emerging markets, those would be more concentrated around Latin America and the Middle East,” said Mr. Goh. “There are not a lot of concerns about political instability in Asia,” he added.