Emerging currencies including lira down as trade war escalates

ANKARA / WASHINGTON

Emerging currencies, including the Turkish Lira, and global stock markets were down on June 19 as the tit-for-tat trade war between the United States and China escalated.

Turkish officials noted the recent problem was completely due to the results of a sharp global sell-off, driven by an escalation in worries over a global trade war.

The sharp risk-off move came after U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods after Beijing’s decision to raise tariffs on $50 billion of U.S. goods. The latter came in retaliation for U.S. tariffs announced last week.

Emerging currencies took a beating, with the rand leading the losses, down 1.7 percent to 6.5-month lows. The lira weakened 1.1 percent to 4.76 against the dollar, also hampered by data on June 18 showing the budget deficit widened by 78 percent in the first five months of the year as government spending increased ahead of elections.

Turkish Deputy Prime Minister Mehmet Şimşek said the recent fluctuations were not resulting from what was happening in Turkey.

“What we are facing now is a global sell-off! This is not peculiar to our country. The main problem is an escalation in protectionism [trade war] worries,” he tweeted on June 19, noting that the rand was down 1.6 percent and Chinese stocks plunged nearly 5 percent with European stock markets also decreasing.

Şimşek also noted the Central Bank took the required steps, adding “the elections will ease uncertainties.”

On June 19, China’s yuan weakened 0.5 percent, while the offshore yuan fell 0.2 percent, both to more than five-month lows. A drop of around 0.7 percent in oil prices took its toll on Russia’s ruble, which fell 1.2 percent to a six-week low. Mexico’s peso also fell around 0.8 percent and India’s rupee 0.3 percent in the broad-based sell-off.

MSCI’s benchmark emerging stocks index fell almost 2 percent, set for its biggest one-day loss since March, with Chinese bourses taking the biggest hit.

All Asian and European stock markets tumbled on rising fears.

Frankfurt was the heaviest faller among leading European indices, shedding 1.4 percent in late morning deals, which followed a drop of 3.8 percent for Shanghai.