Turkey’s currency and equities collapsed following the abrupt resignation of its central bank president, a move that prompted investors to take a cautious stance on risky assets on Monday.
The USDTRY dollar,
rose by 15% against the Turkish lira and the BIST-100 XU100 stock market index,
it negotiated 8% lower after President Recep Tayyip Erdogan’s decision to replace Governor Naci Agbal with Sahap Kavcioglu – the third change at the Central Bank of the Republic of Turkey (CBRT) in two years. Turkey’s central bank raised interest rates by 2 percentage points last week to 19%, one percentage point more than expected.
“With Naci Agbal’s departure from the CBRT, Turkey loses one of its last anchors of institutional credibility,” said Phoenix Kalen, strategist at French bank Societe Generale. “During his short tenure, Agbal succeeded where several predecessors did not – cultivating confidence in the central bank’s inflation target structure, restoring monetary policy independence, encouraging international investors to re-engage in the crisis-prone Turkish narrative by driving a 18.0% rise in the lira against the dollar and, most crucially – in stopping and even reversing the damaging trend of dollarization in the economy. “
Movements in Turkey sent traders to safe haven currencies, such as the DXY dollar,
and the Japanese yen USDJPY,
and away from emerging market currencies, including the Mexican peso USDMXN,
the South African rand USDZAR,
and the Russian ruble USDRUB,
BBVA BBVA,
which holds just under half of Turkey’s BBVA Garanti, fell 7% in Madrid.
This caution spread to the stocks, where Stoxx Europe 600 SXXP,
and US ES00 stock futures,
were fractionally larger.
Airline shares, including International Airlines Group IAG,
easyJet EZJ,
and Ryanair RYA,
it skidded after scientific advisers allegedly urged UK Prime Minister Boris Johnson not to lift the ban on foreign holidays. This is while the European Union has struggled in its vaccination campaign and is now considering blocking vaccine exports made by AstraZeneca to the United Kingdom.
AstraZeneca AZN shares,
who separately reported that his vaccine, made with the University of Oxford, was 79% effective in preventing COVID-19 and 100% effective in preventing serious illnesses in a study in the U.S., increased 1.1%.
Volkswagen VOW3,
and its majority owner, Porsche Automobil Holding PAH3,
both have moved on, continuing their stellar race since VW outlined their plans for electric vehicles and batteries. Deutsche Bank analysts increased their target price at VW by 46% and at Porsche by 38%. “With the global implementation of ID.4, we see a good chance that VW will surpass Tesla’s TSLA,
[battery electric vehicle] sales already next year, which should increase the credit given to its EV strategy ”, say the analysts.