Turkey’s currency and equities collapsed after the abrupt completion of the central bank’s head, which led investors to take a cautious stance on risky assets on Monday.
The USDTRY Dollar,
increased by up to 15% against the Turkish lira and the BIST-100 XU100 stock index,
changed 8% less after President Recep Tayyip Erdogan’s decision to replace Governor Naci Agbal with Sahap Kavcioglu, the third change of the Central Bank of the Republic of Turkey (CBRT) in two years. Last week, Turkey’s central bank raised interest rates 2 percentage points to 19%, a total percentage higher than expected.
“With the expulsion of Naci Agbal 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 had succeeded where several predecessors had failed: to cultivate confidence in the central bank’s inflation targeting framework, to restore the independence of monetary policy, to encourage international investors to return to commit to the crisis-prone Turkish narrative by pushing a rally of 18.0% on the lira against the dollar and, above all, when it comes to arresting and even reversing the damaging dollarization trend of 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 has just under half of the Turkish Garanti BBVA, fell 7% in Madrid.
This precaution extended to stocks, where the Stoxx Europe 600 SXXP,
and futures on US ES00 stocks,
they were fractionally higher.
Shares of airlines such as International Airlines Group IAG,
easyJet EZJ,
and Ryanair RYA,
skidded after, according to reports, scientific advisers urged British Prime Minister Boris Johnson not to lift the ban on foreign holidays. This happens when the European Union has struggled in its vaccination campaign and is now considering blocking exports of AstraZeneca-made vaccines to the UK.
Shares of AstraZeneca AZN,
who reported separately that their vaccine, made with Oxford University, was 79% effective in preventing COVID-19 and 100% effective in preventing serious disease in a trial in the United States, increase by 1.1%.
Volkswagen VOW3,
and its majority owner Porsche Automobil Holding PAH3,
both advanced, continuing their stellar career since VW established its plans for electric vehicles and batteries. Deutsche Bank analysts raised their price target on VW by 46% and on Porsche by 38%. “With the global launch of ID.4, we see a good chance that VW can outperform Tesla’s TSLA,
[battery electric vehicle] sales as early as next year, which should increase the credit given to its EV strategy, ”analysts said.