Markets fall as Beijing threatens retaliation following US closure of Chinese consulate BENGALURU: The Turkish lira weakened on Wednesday as the country’s tensions with Greece rose, while emerging market stocks fell after three straight sessions of gains amid signs of increasing strain in US-China relations. The lira fell against the dollar, after Greece accused Turkey on Tuesday of attempting to encroach on its continental shelf in a serious escalation of tensions between the two NATO allies at odds over a range of issues. Turkey’s currency has fallen 13 percent so far this year, with recent data from bank regulator BDDK highlighting short foreign exchange positions, beyond limits usually permitted by the regulator. Analysts at Commerzbank say the data is consistent with market speculation that state banks cooperated with bank regulators to intervene against lira weakness by keeping their foreign exchange positions shorter than required. “But, if this were to become a regular tool of FX intervention, it would spell trouble for the lira down the road because of the systematic weakening of bank balance sheets.” The high-yielding South African rand slipped from a one-and-a-half month high, with investors watching for the South African Reserve Bank (SARB), which will end its three-day policy meeting on Thursday, with lending rates expected to be cut by 25 basis points. Russia’s rouble mirrored a drop in oil prices, while central and eastern European countries remained range bound against the euro. The MSCI’s developing world stocks index fell 0.6 percent after China said the US had abruptly told it to close its consulate in the city of Houston, a move that Beijing said it strongly condemns, threatening retaliation. “This is a very fragile market, and the last thing traders need is to deal with another unwanted episode of Axis vs. Allies,” said Stephen Innes, chief global markets strategist at AxiCorp. The index had risen to its highest level in nearly two weeks as the European Union agreed on a massive stimulus plan and several promising trials raised hopes for a coronavirus vaccine. However, rising global coronavirus infections pose a significant threat to a 43 percent recovery in the index from a March trough.