Turkish markets feel the heat after central bank shakeup

  • 3/22/2021
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LONDON (Reuters) - The sacking of Turkey’s hawkish central bank chief over the weekend has jolted financial markets, with investors rapidly taking bets off the lira, long-dated bonds and the country’s main stocks index, which all sold off steeply on Monday. The lira at one point plunged as much as 17.5%, to near-record lows against the U.S. dollar, before paring some losses to settle at 7.89. Istanbul’s main stocks index slumped 9.6% and was poised for its worst selloff since 2013. The vulnerable currency has regularly been crunched as central bank governors were abruptly removed by the president. Naci Agbal’s dismissal on Saturday was the third such move since mid-2019 and came two days after he hiked the policy interest rate to 19%, the highest of any G20 economy. Below are a series of charts detailing the scale of the damage so far in financial markets: 1/ LIRA FREEFALL The lira is no stranger to outsized moves, but on Monday it was on course for one of its top four drops of all time. Graphic: Turkey Lira - Local 10-year sovereign bonds yields surged to over 18% -- more than twice that on their South African, Russian or Brazilian peers. Longer-dated dollar-denominated Turkish government bonds also suffered some of their biggest daily drops on record, leaving little place for investors to take shelter as stocks and the currency crumbled. Graphic: Turkey sovereign bond yields - The main BIST 100 stocks index was on track to record its worst day since 2013, when a market “tantrum” over the U.S. Federal Reserve’s plan to taper bond buying crushed emerging markets. Graphic: Turkey"s BIST100 sinks after Erdogan yet again fires cenbank chief - The fallout from the crash in the lira spread to Europe, with banks such as BBVA, UniCredit and ING taking a beating. BBVA was the worst affected with major exposure. Graphic: The lira-BBVA correlation - Erdogan’s series of aggressive actions has left the country’s financial markets in tatters. Societe Generale analyst Phoenix Kalen for instance said this has left Turkey “beyond the point of no return”. Graphic: Lira Timeline Central Bank Governors -

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