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Lira Weakens as Corporates Keep Buying Dollars Despite New Rule

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© Bloomberg. An electronic board displays exchange rates information at a currency exchange bureau in Istanbul, Turkey, on Friday, June 24, 2022. Tourism arrivals in May surged 308% year-on-year, boosting hopes that a rebound in the sector can support the weakening Lira. Photographer: Erhan Demirtas/Bloomberg

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The Turkish currency retreated on Tuesday as companies continued to buy dollars for a second day after a new rule imposed restrictions on extending lira loans to foreign-exchange-rich corporates.

The lira fell as much as 0.5% to 16.6376 per dollar after rising more than 2% on Monday. Corporates purchased dollars even as state lenders moved to defend the local currency, according to three traders who asked not to be identified because they’re not authorized to speak publicly. 

State lenders sold more than $1 billion in two days to support the currency, they said. One trader said the net impact was limited as some firms’ dollar sales were offset by others.

The country’s banking regulator restricted commercial lira loans to corporate borrowers if they held more than 15 million liras ($902,000) in foreign currencies and if such an amount exceeded 10% of total assets or annual sales. The move is one of the most forceful attempts to date to support the lira.

Instead of raising interest rates to contain soaring inflation and the voracious local appetite for dollars, regulators have put in place a series of other curbs to support the currency since 2018. The central bank has held its key policy rate at 14% over the past six months while consumer prices rose at the fastest pace since 1998. Turkey’s interest rates are now the world’s most negative when inflation is factored in. 

The regulator’s chief, Mehmet Ali Akben, said the measure will “ensure loans are properly used” and will “positively contribute to bringing inflation under control,” state-run Anadolu Agency reported. 

The Borsa Istanbul 100 Index, Turkey’s equity benchmark, climbed 0.6% as of 1 p.m. in Istanbul. The cost of insuring the nation’s bonds against default for five years rose 13 basis points to 784.

State banks don’t comment on their interventions in the foreign-exchange market. A former central-bank governor said in 2020 that government-owned lenders carry out transactions in line with regulatory limits and may continue to be active in the currency market.

©2022 Bloomberg L.P.

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The US dollar rate today is stable against the euro, rising against the yen

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us dollar rate today

The US dollar rate today is stable against the euro, rising against the yen and weakly rising against the pound. The market is waiting for the publication of the Federal Reserve’s (Fed) July meeting minutes.

The Fed will release the minutes of the Federal Open Market Committee (FOMC) meeting on Wednesday, July 26-27.

Fed Chairman Jerome Powell said during a news conference following the July meeting that the U.S. Central Bank may slow the pace of increases in the base interest rate, and the minutes may give the same signal, according to a currency market analyst at MUFG Bank Sophia Ng, whose opinion leads to Dow Jones. This will confirm market participants in the opinion that the Fed will raise the rate by less than 75 basis points in September, the expert said.

Dollar rate chart

The euro/dollar pair is trading at $1.0169, compared to $1.0171 at the close of the previous session.

The U.S. currency went up by 0.26% to 134.55 yen against 134.22 yen in Monday trading. The pound grew by 0.12% to $1.2111 from $1.2096 a day earlier.

The index, calculated by ICE, which shows the dollar trend against six currencies (euro, Swiss franc, yen, Canadian dollar, pound and Swedish krona), lost 0.13%, while the broader WSJ Dollar Index – 0.07%.

As of Tuesday’s trading results, the dollar fell 0.14% against the euro and 0.37% against the pound, while strengthening 0.68% against the yen.

Earlier we reported that the quarterly GDP growth estimate for the euro zone had worsened to 0.6%

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Is the EU economy growing? Quarterly GDP growth estimate for the eurozone worsened to 0.6%

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Eurozone gdp growth 2022

Is the EU economy growing? Quarterly estimate of eurozone GDP growth worsened to 0.6%Eurozone GDP growth quarterly estimate worsened to 0.6%In the 2nd quarter, the economy of 19 eurozone countries increased by 0.6% compared with the previous quarter, according to the revised data of the EU Statutory Administration.

Thus, the indicator was worsened from the preliminary estimate of 0.7%.

Eurozone gdp growth 2022

Analysts on average did not expect a revision from the previously announced level, according to Trading Economics. On an annualized basis, eurozone GDP grew by 3.9% in April-June, rather than 4% as previously reported. Experts also did not forecast a revision of this indicator.

Among the largest economies of the region, the GDP of Spain increased by 1.1% in quarterly terms. Italy – by 1%. France – by 0.5%. Meanwhile, the German economy remained unchanged from the first quarter, while the GDP of Portugal, Lithuania and Latvia decreased by 0.2%, 0.4% and 1.4% respectively.

In Q1 this year, eurozone GDP growth was 0.5% quarter-on-quarter and 5.4% year-on-year. This is the second of three estimates of quarterly economic growth in the currency bloc. The final data will be published on September 7. The quarterly GDP growth estimate for the euro area has been downgraded to 0.6%. 

Earlier we talked about crude oil price forecast for 2022.

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Crude oil price forecast 2022: WTI in free fall amid global turmoil

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crude oil price forecast 2022

Crude oil prices are in free-fall at the beginning of the week, with a barrel of West Texas Intermediate currently trading at $86.63, not far from this month’s low of $86.40. What is the crude oil price forecast for 2022? 

Several factors are affecting oil prices, the main one being the worsening demand outlook. Data from China showed that in July, the country’s crude oil transshipment fell to its lowest level since March 2020, at 53.21 million tons of crude oil. This figure was also 8.8% lower than in the same period last year. Also, disappointing data on retail sales and industrial production in China revived fears of a global recession.

Crude oil price forecast chart – what affects the forecast? 

On the supply side, Saudi Aramco’s CEO said Sunday that they could increase production to a maximum capacity of 12 million barrels per day if the government demanded it. Looking ahead, Iran’s response to the EU’s proposal to reopen the 2015 nuclear deal, which is expected to be announced later in the day, could affect crude oil prices. Should Iran and the U.S. reach an agreement, it could lead to the lifting of sanctions on oil and gas exports from Iran.

The aforementioned August low is WTI’s lowest level since February, which means that a break below it could lead to a sharper drop. The initial bearish target and immediate support level is the $86.10 area, where the black gold has several intraday highs and lows since January of this year. A bearish breakout could lead to a test of the $85.00 level. The sour tone in stocks will likely keep crude oil prices in a downtrend for the rest of the day.

If Wall Street recovers, WTI could also find some demand. Intraday resistance is at the $88.50 and $90.00 levels. Nevertheless, technical indicators suggest that oil prices will be declining in the near term, adding to the negative fundamental picture.

Earlier we reported that the dollar is rising against the euro and the pound

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