Turkey’s lira slumped to a record low against the dollar on Monday, a day after the country’s longest-serving leader Recep Tayyip Erdogan won the presidency in a run-off election.
The currency was trading at 20.10 to the dollar at 4.48pm UAE time.
The lira has dropped sharply since the start of the year despite the central bank’s interventions and other support measures, such as limiting the amount of dollars that lenders can purchase on the interbank market and converting dollars to liras, Eirini Tsekeridou, fixed income analyst at Julius Baer, said in a note.
“The laser focus remains on the central bank’s FX [foreign exchange] reserves which have precipitously declined since the beginning of 2023 and are close to levels when previous lira volatility acutely increased,” said Ehsan Khoman, director and head of commodities, ESG and emerging market research at MUFG.
The near-term expectation is for a “continuation of the heterodox policy mix, though growing market apprehensions could force an adjustment”, he said.
Mr Erdogan won the presidency in the run-off vote with 52.14 per cent of the votes, while his rival Kemal Kilicdaroglu received 47.86 per cent of the votes, electoral commission chief Ahmet Yener said on Sunday.
In his victory speech on Monday, Mr Erdogan acknowledged that inflation was the most urgent issue for the country, but said it would also fall, following the policy rate that was cut to 8.5 per cent, from 19 per cent two years ago.
“We are designing an economy focused on investment and employment, with a finance management team that has international reputation,” Mr Erdogan said.
Last week, Turkey’s central bank kept the policy rate on hold at 8.5 per cent, with the committee acknowledging the recession fears in developed economies and high inflation.
The current policy rate is deemed as adequate, for now, to maintain financial and price stability, the regulator said.
Within Turkey, the committee pointed out that domestic demand was recovering before the earthquakes in February, the economic cost of which has been estimated at $104 billion by the Treasury.
It also repeated its expectation that the quakes would have a temporary effect on economic activity.
“This outcome was in line with our and market expectations. Preserving 'growth momentum in industrial production' and 'supporting recovery in aftermath of the earthquake' underpinned the policy rate pause extension,” economists from Abu Dhabi Commercial Bank said in a research note.
The Turkish currency has been under severe pressure since Mr Erdogan began to enforce unorthodox economic monetary policies in 2018.
Headline inflation was steep at 43.7 per cent year on year in April, although it has been decelerating, while real interest rates are at minus 35.2 per cent, according to ADCB.
Turkey aggressively cut interest rates to boost growth even as inflation surged.
"[Mr] Erdogan's policies have brought very high inflation to Turkey as interest rates continue to go lower,” said Charu Chanana, Asian market strategist at Saxo Bank.
“This negative real yield in Turkey is likely to get worse as he gets into his next term.”
Julius Baer’s Ms Tsekeridou added: “We expect President Erdogan … to maintain his unorthodox economic policies.”
The currency could slide by another 30 per cent to 28 against the dollar by the end of the year, Bloomberg cited Morgan Stanley as saying.
“Under the lens of no monetary policy pivot, authorities may respond with additional regulatory measures to address the risk of dollarisation, as well as to secure bilateral funding from other central banks or other sources, to avoid any balance of payments pressures,” Mr Khoman said.
A key marker to monitor will be the central bank’s available FX liquidity, he said.
“If it were to fall further, then a potential reluctant transitory U-turn through higher rates may be on the table, to circumvent financial stability risks.”
Mr Erdogan’s commitment to a heterodox policy mix “would necessitate introducing further regulatory measures to limit FX demand and banking sector restrictions”, according to ADCB's economists.
“However, Turkey’s monetary policy is resulting in falling FX reserves, and further declines could eventually prompt the [central bank] to raise the policy rate. We believe that foreign capital would need to see a significant change in policy before returning,” they said.
On Monday, Turkey's stock market, the Borsa Istanbul, recorded strong gains, with the benchmark BIST-100 trading about 3.23 per cent higher at 4.57pm UAE time.
Stocks rose on positive momentum from investors after Mr Erdogan's remarks on setting up the new economic team.
Meanwhile, the country’s economy is forecast have grown by 3 per cent annually in the first quarter, down from 3.5 per cent in the fourth quarter of 2022, according to Goldman Sachs.
“This is despite the earthquake that took place in February as we expect the disaster’s overall impact on GDP [gross domestic product] to be somewhat muted, given that the immediate impact on productive capacity was offset by [a] supportive fiscal and monetary response,” it said in a research note.
Turkey’s economy posted the third-highest growth among G20 countries in 2022, rising 5.6 per cent, slightly behind India and Saudi Arabia, the Organisation for Economic Co-operation and Development said in March.
This followed an 11.4 per cent growth in 2021.
“Given Turkey’s declining reserves, with a current account deficit that reached over 6 per cent of GDP in Q1, and the consequent pressures on the lira, we expect policy to tighten in the second half, leading to a slowdown in growth,” Goldman Sachs said.
Turkish growth tends to be a function of its external funding, and given that the foreign reserve buffer has fallen significantly and the credit default swap (CDS) spread has widened, “we think the external funding requirement will become a significant drag on growth in H2-2023”, it said.
Turkey’s five-year CDS have risen the most around the globe since the first-round vote on May 14, to about 665 basis points, according to Bloomberg.
“The main risk to our view is that we underestimate the amount of non-market funding that is available to Turkey, flows that have supported the country since the middle of last year.”
Greatest Royal Rumble results
John Cena pinned Triple H in a singles match
Cedric Alexander retained the WWE Cruiserweight title against Kalisto
Matt Hardy and Bray Wyatt win the Raw Tag Team titles against Cesaro and Sheamus
Jeff Hardy retained the United States title against Jinder Mahal
Bludgeon Brothers retain the SmackDown Tag Team titles against the Usos
Seth Rollins retains the Intercontinental title against The Miz, Finn Balor and Samoa Joe
AJ Styles remains WWE World Heavyweight champion after he and Shinsuke Nakamura are both counted out
The Undertaker beats Rusev in a casket match
Brock Lesnar retains the WWE Universal title against Roman Reigns in a steel cage match
Braun Strowman won the 50-man Royal Rumble by eliminating Big Cass last
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
AUSTRALIA%20SQUAD
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Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
THE%20SPECS
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Iran's dirty tricks to dodge sanctions
There’s increased scrutiny on the tricks being used to keep commodities flowing to and from blacklisted countries. Here’s a description of how some work.
1 Going Dark
A common method to transport Iranian oil with stealth is to turn off the Automatic Identification System, an electronic device that pinpoints a ship’s location. Known as going dark, a vessel flicks the switch before berthing and typically reappears days later, masking the location of its load or discharge port.
2. Ship-to-Ship Transfers
A first vessel will take its clandestine cargo away from the country in question before transferring it to a waiting ship, all of this happening out of sight. The vessels will then sail in different directions. For about a third of Iranian exports, more than one tanker typically handles a load before it’s delivered to its final destination, analysts say.
3. Fake Destinations
Signaling the wrong destination to load or unload is another technique. Ships that intend to take cargo from Iran may indicate their loading ports in sanction-free places like Iraq. Ships can keep changing their destinations and end up not berthing at any of them.
4. Rebranded Barrels
Iranian barrels can also be rebranded as oil from a nation free from sanctions such as Iraq. The countries share fields along their border and the crude has similar characteristics. Oil from these deposits can be trucked out to another port and documents forged to hide Iran as the origin.
* Bloomberg
Killing of Qassem Suleimani
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
WRESTLING HIGHLIGHTS
COMPANY%20PROFILE
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Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Fines for littering
In Dubai:
Dh200 for littering or spitting in the Dubai Metro
Dh500 for throwing cigarette butts or chewing gum on the floor, or littering from a vehicle.
Dh1,000 for littering on a beach, spitting in public places, throwing a cigarette butt from a vehicle
In Sharjah and other emirates
Dh500 for littering - including cigarette butts and chewing gum - in public places and beaches in Sharjah
Dh2,000 for littering in Sharjah deserts
Dh500 for littering from a vehicle in Ras Al Khaimah
Dh1,000 for littering from a car in Abu Dhabi
Dh1,000 to Dh100,000 for dumping waste in residential or public areas in Al Ain
Dh10,000 for littering at Ajman's beaches
Global Fungi Facts
• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
SPECS
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The biog
Name: Younis Al Balooshi
Nationality: Emirati
Education: Doctorate degree in forensic medicine at the University of Bonn
Hobbies: Drawing and reading books about graphic design
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
What to watch out for:
Algae, waste coffee grounds and orange peels will be used in the pavilion's walls and gangways
The hulls of three ships will be used for the roof
The hulls will painted to make the largest Italian tricolour in the country’s history
Several pillars more than 20 metres high will support the structure
Roughly 15 tonnes of steel will be used
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Armies of Sand
By Kenneth Pollack (Oxford University Press)
The%20specs
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