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GLOBAL MARKETS-Asia cautious as Turkish lira takes a dive

Stock MarketsMar 22, 2021 06:50
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© Reuters.

* Asian stock markets :
* Turkish lira skids as Erdogan dumps central banker
* Yen makes modest gains, eyes on Japanese retail investors
* Stock futures point to limited fallout so far

By Wayne Cole
SYDNEY, March 22 (Reuters) - Asian markets faced a fresh
stress test on Monday as a plunge in the Turkish lira lifted the
safe-haven yen and blunted risk appetite, although the fallout
so far looked to be relatively contained.
The dollar was trading almost 15% higher on the lira
TRYTOM=D3 at 8.3000 after President Tayyip Erdogan shocked
markets by replacing Turkey's hawkish central bank governor with
a like-minded critic of high interest rates. "Erdogan's decision to fire Governor Agbal, who had sought
to instil some price stability and perception of Bank
independence, now raises question as to whether the new Governor
will look to lower rates while still aim to fight higher
inflation," said Rodrigo Catril, a senior FX strategist at NAB.
The uncertainty was enough to see Nikkei futures NKc1 ease
to 29,280, pointing to an opening drop from the cash close on
Friday of 29,792 .N225 .
Nasdaq futures NQc1 dipped 0.3% and S&P 500 futures ESc1
0.2%. June futures for Treasury 10-year notes TYc1 edged up
just 1 tick, suggesting there was no broad rush to safety.
Investors are still struggling to deal with the recent surge
in U.S. bond yields, which has left equity valuations for some
sectors, particularly tech, looking stretched.
Bonds had another wobble on Friday when the Federal Reserve
decided not to extend a capital concession for banks, which
could lessen their demand for Treasuries. The damage was limited, however, by the Fed's promise to
work on the rules to prevent strains in the financial system.
Monday's tumble in the lira saw the yen firm modestly, with
notable gains on the euro EURJPY= and Australian dollar
AUDJPY= . That in turn dragged the euro down slightly on the
dollar to $1.1880 EUR=D3 .
After an initial slip, the dollar soon steadied at 108.86
yen JPY= , while the dollar index was a shade higher at 92.080
=USD .
Also lifting the yen were concerns Japanese retail investors
that have built long lira positions, a popular trade for the
yield-hungry sector, might be squeezed out, so triggering
another round of lira selling.
Still, analysts at Citi doubted that episode would lead to
widespread pressure on emerging markets, noting the last time
the lira slid in 2020, there was little spillover.
"In terms of impact on other parts of the high-yielding EM,
we believe that will be quite limited," Citi said in a note.
There was little sign of safe-haven demand for gold, which
eased 0.3% to $1,739 an ounce XAU= .
Oil prices fell anew, having shed almost 7% last week as
concerns about global demand prompted speculators to take
profits on long positions after a long bull run. O/R
Brent LCOc1 was off 29 cents at $64.24 a barrel, while
U.S. crude CLc1 lost 24 cents to $61.18 per barrel.

Asia stock markets
Asia-Pacific valuations

GLOBAL MARKETS-Asia cautious as Turkish lira takes a dive

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