Forex
Exclusive-European fund giant Amundi dips toe back into Turkey’s lira
![](https://letizo.com/wp-content/uploads/2023/11/exclusive-european-fund-giant-amundi-dips-toe-back-intoturkeys-lira_656601180f030.jpeg)
![Exclusive-European fund giant Amundi dips toe back into Turkey's lira](https://i-invdn-com.investing.com/trkd-images/LYNXMPEJAR0GI_L.jpg)
© Reuters. FILE PHOTO: A logo of Amundi is seen outside the company headquarters in Paris, France, February 3, 2023. REUTERS/Sarah Meyssonnier/File Photo
By Marc Jones
LONDON (Reuters) – Amundi, Europe’s largest asset manager and among the top 10 in the world, has started dipping its toe back into the Turkish lira having been impressed by the country’s turnaround efforts since its mid-year elections.
The Paris-based firm, which has $2 trillion worth of assets under management, is yet to go all in given the lira’s ongoing grind lower but says it has taken its first step towards it by reversing long-held bets against the currency.
Sergei Strigo, Amundi’s co-Head of Emerging Markets Fixed Income, said last week’s 500 basis-point interest rate hike to 40% in Turkey was “all very positive” and a sign of its seriousness in tackling its inflation problem.
“We have started to cover our underweight in Turkish lira a few weeks ago,” Strigo told Reuters, referring to the process of taking a more positive view on the currency.
“We are not yet ready to increase the allocation but it is definitely on our radar screen.”
Having seen international appetite for investing in Turkey shredded by the near 85% plunge in the lira’s value over the last five years, more positive moves by heavyweight firms like Amundi will be seen as a signal of hope.
Following his re-election in May, President Tayyip Erdogan brought in a new-look cabinet and central bank that have sought to ditch years of unorthodox policymaking by embracing aggressive interest rate hikes.They have also begun unwinding the state’s heavy-handed financial market regulations to help entice investment and rebuild depleted reserves wiped out over recent years.
Amundi, while the first major fund to formally declare its shift, is not alone in testing the waters, according to other foreign investors and bankers.
Investment bank JPMorgan has recommended the FX forwards trade in recent weeks and both it and rival Goldman Sachs are aggressively pitching Turkish government bonds with durations of 1-10 years, according to some investors.
The scars of Erdogan’s unpredictability however – including firing four central bank chiefs in the last four years – means international funds as a group hold less than 1% of lira-denominated government bonds. “It could be one of the most interesting stories for 2024,” Strigo said, referring to a potential mass return of investor appetite if the policy shift sticks.
For now, the FX forwards that Amundi is using currently price in the lira slumping another 40% to around 40 to the dollar over the next year, which Strigo sees as unlikely. Amundi’s tentative optimism is balanced by upcoming nationwide local elections in March, when vote-getting fiscal stimulus could distract Erdogan from his newfound policy path.
“It is probably the easiest way for now,” Strigo said about the use of FX forwards to express that balance.
Next year could be the time to start buying local currency debt he added, but “local elections have historically been the event when the fiscal (stance) needs to be loosened up to get the necessary votes.”
Seeking to boost confidence in the policy shift – and convince sceptics that Erdogan backs it – Central Bank Governor Hafize Gaye Erkan will hold the bank’s first investor day meeting in New York on Jan. 11.
With the bank having lifted rates to 40% from 8.5% since June, Amundi thinks another hike next month could finish the job. “For sure what is true is that the lira as a currency, considering the carry (interest rates on bonds versus elsewhere in the world), is becoming much more attractive than it use to be.”
Forex
Major Russian lenders say yuan coffers empty, urge central bank action
![](https://letizo.com/wp-content/uploads/2024/09/major-russian-lenders-say-yuan-coffers-empty-urge-centralbank-action_66dc6b1523127.jpeg)
By Elena Fabrichnaya
MOSCOW (Reuters) – Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits.
The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry’s plans for forex interventions implied that the central bank’s daily yuan sales would plunge in the coming month to the equivalent of $200 million.
The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft’s 15 billion yuan bond placement, which also sapped liquidity from the market.
“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market.
The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients.
Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies.
Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions.
At the start of September, banks raised a record 35 billion yuan from the central bank through its one-day swaps.
“I think the central bank can do something. They hopefully understand the need to increase the liquidity offer through swaps,” said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should sell more yuan as well.
The acute yuan shortage also follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo.
Russia and China have been discussing a joint system for bilateral payments, but no breakthrough is in sight. VTB’s Kostin said that since Russia’s trade with China was balanced, establishing a clearing mechanism for payments in national currencies should not be a problem.
Forex
Bank of America sees more downside for the dollar
![](https://letizo.com/wp-content/uploads/2024/09/bank-of-america-sees-more-downside-for-the-dollar_66dc6b1b4bb7b.jpeg)
Investing,com – The US dollar has stabilized after a sharp fall in August, but Bank of America Securities sees more troubles ahead for the US currency.
At 07:20 ET (11:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.077, having largely held its course over the last week.
That said, the US currency is still down 1.6% over the month.
The dollar’s selloff last month stood out in a historical context, according to analysts at Bank of America Securities, in a note dated Sept. 5.
The greenback has since stabilized, however, despite the outsized weakness, the US bank still sees three reasons to stay bearish on the Dollar Index (DXY).
Following similar episodes of bearish DXY breakouts, the index has tended to continue its downtrend, the bank said.
In the last 3 analogs, DXY index fell on average for another 4% before reaching a bottom. Extending this analysis to bilateral USD/G10 pairs suggests a continuation of the USD downtrend is more likely vs EUR, GBP, and AUD than SEK, NOK, and CHF in G10.
While the DXY made a new year-to-date low in August, broad nominal and real USD trade-weighted indices have stayed at Q4 2022 levels and would suggest the USD remains overvalued.
The USD selloff in 2024 has been concentrated in and other European currencies, leading to DXY divergence from other USD indices.
The bank also noted US 10y Treasury yield’s tendency to fall after the first Federal Reserve cut, while global financial conditions are set to loosen further.
“USD may see more weakness as other central banks, particularly the ones that cut policy rates ahead of the Fed, can now afford to let the Fed do some of their work and indirectly support global economies outside of the US,” BoA added.
Forex
Dollar’s demise appears overstated – JPMorgan
![](https://letizo.com/wp-content/uploads/2024/09/dollars-demise-appears-overstated-jpmorgan_66dc6b208bdf2.jpeg)
Investing.com – The US dollar has had a difficult summer, dropping substantially during the month of August, but JPMorgan thinks those predicting the demise of the U.S. currency are getting ahead of themselves.
At 06:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 101.127, having lost 1.6% over the course of the last month.
“Diversification away from the dollar is a growing trend,” said analysts at JPMorgan, in a note dated Sept. 4, “but we find that the factors that support dollar dominance remain well-entrenched and structural in nature.”
The dollar’s role in global finance and its economic and financial stability implications are supported by deep and liquid capital markets, rule of law and predictable legal systems, commitment to a free-floating regime, and smooth functioning of the financial system for USD liquidity and institutional transparency, the bank added.
Additionally, the genuine confidence of the private sector in the dollar as a store of value seems uncontested, and the dollar remains the most widely used currency across a variety of metrics.
That said, “we are witnessing greater diversification and important shifts in cross-border transactions as a result of sanctions against Russia, China’s efforts to bolster usage of the RMB, and geoeconomic fragmentation,” JPMorgan said.
The more important and underappreciated risk, the bank added, is the increased focus on payments autonomy and the desire to develop alternative financial systems and payments mechanisms that do not rely on the US dollar.
“De-dollarization risks appear exaggerated, but cross-border flows are dramatically transforming within trading blocs and commodity markets, along with a rise in alternative financial architecture for global payments,” JPMorgan said.
- Forex2 years ago
Forex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
- Forex2 years ago
How is the Australian dollar doing today?
- Forex2 years ago
Dollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
- Forex2 years ago
Unbiased review of Pocket Option broker
- Cryptocurrency2 years ago
What happened in the crypto market – current events today
- World2 years ago
Why are modern video games an art form?
- Stock Markets2 years ago
Morgan Stanley: bear market rally to continue
- Commodities2 years ago
Copper continues to fall in price on expectations of lower demand in China