Turkey's Lira and South Africa's Rand Tumble as Argentine Peso Crashes

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FILE PHOTO: Turkish Lira banknotes are seen in this October 10, 2017 picture illustration.
FILE PHOTO: Turkish Lira banknotes are seen in this October 10, 2017 picture illustration.Credit: \ MURAD SEZER/ REUTERS

Emerging currencies sold off sharply again on Thursday after Argentina's peso suffered its biggest one-day decline since 2015 overnight, with Turkey's lira, the South African rand and the Indian rupee all feeling the heat.

The Argentine peso crashed over 7 percent after a collapse in investor confidence in President Mauricio Macri's government. The central bank intervened to try and stabilise the peso, but the currency still closed at a record low of 34.10 per dollar.

The International Monetary Fund (IMF) said it was studying Argentina's request to speed up disbursement of a $50 billion loan programme.

"The external environment has deteriorated since the programme was agreed, so more policy effort may be needed in return for a rephasing of the arrangement," said Stuart Culverhouse, chief economist and global head of fixed income research at Exotix Capital.

"While this should still be viewed as positive, it demonstrates how fragile and exposed Argentina remains just two months after its IMF agreement."

Piotr Matys, an emerging markets strategist at Rabobank, added that the peso's continuing fall despite the IMF programme only proved how difficult it was to restore investor confidence once it was lost: "It's a major warning signal for Turkey."

The Turkish lira tumbled 1.9 percent to a two-week trough in its fourth straight day in the red. Turkish five-year credit default swaps rose 8 basis points (bps) from Wednesday's close to a two-week high of 516 bps, according to IHS Markit.

Ratings agency Moody's sounded the alarm about Turkish bank debt earlier this week. However, Turkey's finance minister was quoted as saying he saw no big risk to the economy or financial system.

Turkish stocks fell 0.6 percent and Turkish bank shares were down 1.1 percent.

Matys noted Turkey hadn't announced any new measures to restore investor confidence since last week's holiday.

"If anything, recent comments from officials indicate they are confident that the measures they have implemented so far will prove sufficient, which is not the case," he said, adding investors still wanted to see a proper rate hike and tighter fiscal policy.

South Africa's rand fell 1.6 percent and stocks slipped 1.2 percent after telecom group MTN's shares plunged over 22 percent to their lowest level since 2009. The moves followed an order from Nigeria that MTN return $8.1 billion.

In Asia, India's rupee slipped 0.3 percent to another record low and the Indonesian rupiah hit a near three-year low.

China's yuan weakened 0.2 percent, erasing all the gains it has made this week following the central bank's latest move to stabilise the currency.

Chinese mainland stocks fell over 1 percent and Hong Kong lost 0.9 percent. U.S. tariffs on another $200 billion of Chinese goods are expected to take effect later next month.

In one bright spot, U.S. President Donald Trump has signed a proclamation allowing targeted relief from steel quotas on South Korea, Argentina and Brazil, and from aluminium quotas on Argentina.

This did little to arrest the selling, however, with MSCI's benchmark emerging equities index down 0.5 percent.

Twenty out of 23 emerging market stock indexes are trading below their 200-day moving average, a technical analysis showed, suggesting further downside risks.