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Renewed decline for the lira knocks other EM currencies


An increasingly familiar story is playing out in foreign exchange markets, with a renewed drop in Turkey’s lira dragging other emerging markets peers along for the ride.

MSCI’s broad EM FX gauge was down 0.52 per cent on Wednesday, having earlier this month reached its weakest level since mid-2017.

The lira’s woes were driven today by Moody’s decision to downgrade 20 of the country’s financial institutions, as well as a reminder from the rating agency that lenders had a substantial amount of foreign currency-denominated debt to refinance over the next 12 months.

Wednesday’s worst EM performers after the lira were the South African rand, down 1.1 per cent against the US dollar, India’s rupee, down ¾ of 1 per cent, and the Polish zloty, down 0.6 per cent.

Mexico’s peso was one of the few EM winners as investor sentiment remained buoyed by news of the country’s bilateral trade deal with the US. It was up 0.1 per cent against the dollar.

Some respite in recent weeks for the lira have seen it trim its year-to-date decline against the greenback to 41 per cent, which is still enough to leave it as 2018’s worst-performing EM currency after the Argentine peso, which is off 40.8 per cent.



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