The US Dollar ravaged the Turkish Lira (USD/TRY) yet again on Friday, as the Turkish currency fell on the prospect of further sanctions. The Lira has lost approximately 40% of its value against the US Dollar (TRY/USD) this year so far and worries are deepening about the state of the Turkish economy. The depreciation is particularly bad considering Turkey needs to import energy and its current foreign currency debt problem.
US Confidence Softens, Dollar Jumps against Turkish Lira as Tensions Rise
A US pastor, Andrew Brunson, is being held in Turkey and today the Turkish court rejected the appeal for release. This comes just a day after the US threatened Turkey with additional sanctions should it choose not to release the pastor. Furthermore, credit rating agencies are looking to downgrade Turkey’s sovereign rating.
Turkish markets will be shut from noon on Monday until the following week as the country celebrates the Eid al-Adha festival.
Meanwhile, in the States, the University of Michigan Sentiment index showed a decline in August, rather than the rise some had expected. The index slipped from 97.9 to 95.3, while economists had forecast a rise to 98.0. However, markets have mainly been focused on the political ramifications of global developments to determine the US Dollar’s movement today.
Canadian Inflation Pace Quickens, Will the BoC Hike Rates in September?
The Canadian Dollar has also slipped against the US Dollar (CAD/USD) on Friday, despite a rise in the Canadian Consumer Price Index (CPI). The July reading jumped from 2.5% to 3.0% on the year, despite forecasts to hold steady at 2.5%. The month of July alone registered a 0.5% jump, far higher than the 0.1% increase expected by economists. The July figure is the highest since 2011, potentially testing the Bank of Canada’s (BoC) rate hike schedule.
Royal Bank of Canada (RBC) assistant Chief Economist Paul Ferley commented:
‘This certainly raises the probability of a move (upward) in September by the bank of Canada, but there’s going to have to be further confirming evidence of strength in the economy and inflation pressure building.’
Some analysts have suggested the chance of a September rate hike resides at around 30%, while many think October could be the next time Canada sees higher rates.
The US Dollar to Turkish Lira (USD/TRY) exchange rate is trading at 6.0891 approximately 4.41% higher. The US Dollar to Canadian Dollar (USD/CAD) exchange rate is trading at 1.3089.