Turkey's exchange rate has been falling, and the risk of sovereign debt default is rising in some countries
At the beginning of this month, the Turkish Lira broke through 7 against the US dollar, and then experienced four consecutive falls. On May 6 and 7, lira continued to set a new record. At 13:03, May 8, Beijing time, the lira was at 7.1023 against the US dollar, up from the previous business days.
Statistics show that the lira has fallen by 17% against the US dollar since this year. In the face of such a trend, the market believes that the fall of the Turkish lira is not over.
The fate of the Turkish lira is not alone. Since the beginning of this year, currencies of emerging market countries including South Africa, Brazil, Mexico and Russia have all stepped out of the sad situation.
What is more worrying is that the risk of sovereign debt default is rising in some countries.
gloomy Turkish exchange rate
Since the beginning of this year, Turkey's inflation has increased sharply, the unemployment rate has risen repeatedly, and the pace of economic growth has slowed down, and the lira has been under more pressure. The lira has been short in the shock, depreciating by 17% against the US dollar.
Turkey is the country with the most confirmed cases of new coronal fever in the Middle East, and its economic development is under pressure. Public data show that the official website of mobile lottery money making platform shows that there are more than 130000 confirmed cases of new coronary fever in Turkey.
The IMF looks forward to the official website of mobile lottery money making platform, and Turkey's economy may be shortened by 5% in 2020. Now the official website of mobile lottery money making platform, Istanbul, Turkey's largest city, has an idle population of more than 2 million.
In favor of the lira against the US dollar, the Central Bank of Turkey has taken a large amount of US dollars from foreign exchange reserves this year. Now, its net foreign exchange reserves have dropped sharply from US $40 billion at the beginning of the year to nearly US $25 billion.
According to Wang Xinjie, China's first investment strategist at Standard Chartered, multiple factors have led to the continuous decline of lira in recent years:
First, affected by the new outbreak of coronary fever, Turkey's economy fell into recession, and the probability of central bank's going down was increased, so the exchange rate was under pressure.
Since the past year, Turkey has reduced its holiday several times. In April this year, Turkey's central bank announced another 100 basis points reduction to 8.75%. Goldman Sachs also announced on May 4 that based on CPI data, it expected that Turkey's central bank could significantly reduce its holiday.
Second, some institutions believe that Turkey's foreign exchange reserves are about to run out, and only through currency swap with other central banks can the fluctuation of foreign currency be maintained.
In late April, TD securities analysts predicted that if the Turkish Lira continued to be under pressure, its foreign exchange reserves could run out as early as July.
Third, recently, Turkey's banking regulatory authorities have taken measures to curb foreign investors' participation in lira denominated market operations, resulting in capital outflow pressure.
On May 6, the Turkish bank regulator (bddk) announced that it would control the lira placement, mortgage loan, repurchase and lending business of Turkish banks and foreign banks and institutions.
However, even in the face of so much negative pressure, S & P issued a positive rating notice to Turkey on May 6: the outlook is peaceful.
S & P believes that although the outbreak of new coronary fever will lead to the decline of Turkey's economy, which will increase the proportion of its fiscal deficit to about 5% of GDP, Turkey's light government debt will not exceed 34% of its GDP by 2020, and there is still room for fiscal policy.
Standard & amp; Poor's rating of Turkey
In this regard, China Merchants Bank took the financial market department foreign exchange initial analyst Li Liuyang believes that many downgrades are confirmed after, the market is light first move. If the impact of the epidemic is great, the sovereign rating will be lowered sooner or later.
not lonely lira
Lira's ups and downs are not unique. Since the beginning of the year, the decline of one-sided emerging market currencies against the US dollar has expanded.
According to the data, since this year, the Brazilian real has fallen by nearly 30% against the US dollar, the South African rand by more than 25%, the Mexican Peso by more than 20% and the Russian Ruble by 16% against the US dollar.
One sided emerging countries' currencies fell against the US dollar from January 1 to May 7, 2020
The reason why these emerging market currencies are interlinked is that they are all weak economies with \
The tan securities Strategy Group believes that with the outbreak of the new crown as the fuse, the strengthening of the US dollar, the shortening of foreign trade and the fiscal deficit will increase the sovereign debt risk of emerging economies with relatively high debt ratio and resource goods export as the main source.%Sovereign debt default worries rise
The strong shock of exchange rate is only an external phenomenon. The risk of sovereign debt default of these weak countries makes the market more worried.
On April 27, the research report issued by Nanhua futures pointed out that it should focus on the debt default risk of Turkey and Brazil. Nanhua futures believes that the proportion of Turkey's foreign debt and net international investment position in GDP is too high, and it has always traded high inflation for high growth. However, the Brazilian authorities have great debt pressure, and the deficit rate and fiscal deficit rate of frequent items are high.
Just last month, Argentina, one of the typical emerging market countries, was unable to pay off its debts due to the impact of the new coronavirus fever. They singled out a comprehensive debt restructuring, including delaying the repayment period and cutting interest and rest. The proposal was rejected by creditors.
So, will sovereign debt defaults of these emerging market countries with \
Wang Xinjie believes that Argentina's debt default risk has existed before the epidemic, but the spread of new coronary fever has increased its default risk. By comparing the three-month CDs data of emerging market countries as a whole, the risk of default spreading is not big now.
On May 6, the international rating agency Fitch revised Brazil's rating exhibition from serene to negative due to multiple factors, such as the unsightly economic outlook of Brazil, the worry about political phenomena and the impact of the new coronary fever epidemic.(source: Shanghai Securities News)