Spillover Emerging

Plenty of interesting moves in the markets lately. Top of every investor’s mind is the Turkish Lira and its ongoing slide. Also, the Russian Ruble, Mexican Peso, and the South African Rand are making massive movements

Some experts are calling it an emerging market currency rout. The thing is, emerging market currencies shouldn’t necessarily correlate with each other.

The only thing they really have in common is that they’re traded against the US Dollar. This lends to the theory that the entire story is actually driven by the US Federal Reserve. As Jerome Powell is forced to react to rising inflation at home, other economies that rely on Dollar stability are bearing the brunt.

Today’s Highlights

Traditional Markets

To think, this situation with the Turkish Lira started with Trump imposing sanctions on August 1st, in relation to a detained pastor who Erdogan refuses to release.

Now it seems that neither is willing to back down and the showdown is affecting most major currencies. The most major of which is the Japanese Yen, which is being seen as a safe haven from this currency conundrum.

With the Yen gaining, the Nikkei 225 is taking a hit as a stronger Yen tends to harm Japanese exports.

Look at the Lira

Earlier this morning, the Turkish central bank did come out with some strong words to try and minimize the damage.

This type of rhetoric can sometimes have an impact on sentiment. Most famously when Mario Draghi stated that they would do “whatever it takes” to save the Euro in 2012. However, investors today were looking for a bit more than words from the central bank.

Later today we’ll also hear from the new finance minister. This recently appointed figure is actually the son-in-law of Recap Tayyip Erdogan. So he will have to put on a helluva show if he’s to impress anyone.