- Turkish lira is under pressure as crackdown after failed coup accelerates
- Government insists that capital controls are "out of the question"
- US dollar investors have fled Turkish stock market in past week
By Walter Kurtz*
We start with emerging markets where the Turkish lira dropped below last Friday's lows (chart shows the number of lira one dollar buys).
Given that the coup had failed, why is the lira still under pressure? It has to do with the rather disturbing headlines coming out of Turkey. Firing thousands of teachers in response to the coup? Is this Turkey's version of the Cultural Revolution? What's next, burning books?
On Twitter, the message from the Turkish Deputy PM (who used to be the Finance Minister) was clear: stop beating up on the lira. The central bank is not going to ease too much, and there is no need to hoard dollars because "capital controls are out of the question". Perhaps.
Indeed, we had only a 25bp rate cut by the Turkish central bank - less than expected. Stabilising the lira has become the priority now.
The bounce in Turkey's stock market didn't last.
US dollar investors in Turkish shares are now down 11.5% over the past week.
The nation's government bonds sold off further, although the yields remain relatively low vs. earlier this year.
Similarly, Turkey's sovereign CDS spread saw a relatively minor increase thus far.
— Edited by D. Deacon
*Walter Kurtz is an alias
**This is an abridged version of the Daily Shot. To subscribe to the full version, click here. E-mail addresses are never shared with anyone.