Lira clampdown hits EM currencies

28 March, 2019

A storm is brewing across Turkey's financial markets as the nation desperately struggles to contain another Lira crisis. Turkish authorities have taken unprecedented measures to prevent Lira volatility by withholding liquidity, with the swap rate rocketing to 1200% on Wednesday. The extremely high borrowing cost makes it almost impossible for foreign investors to sell the Lira just days before the local elections commence. However, when liquidity eventually returns the Turkish Lira is likely to find itself exposed to severe downside shocks.

The absence of liquidity is impacting the USDTRY with prices trading marginally below 5.400 as of writing. In regards to the technical picture, prices are looking bearish on the daily charts with sustained weakness below 5.400 opening a path towards 5.240.

USDZAR breaks above 14.60 

The currency crunch in Turkey has spooked investors with an appetite for emerging market currencies. Buying sentiment towards the Rand deteriorated today as reflected in the USDZAR. The technical picture suggests further upside with a daily close above 14.600 opening a path higher towards 14.658 and possibly higher.

USDMXN eyes 19.40 

The USDMXN jumped considerably today with prices hitting a daily high of 19.37. Prices have scope to push higher if bulls are able to secure a daily close above 19.40.

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