Turkish Lira Depreciates despite Positive GDP Growth
How Global Currencies Were Impacted by Inflation and Jobs Data
Turkish lira extends fall on geopolitical concerns
The Turkish lira fell against the US dollar on December 10, 2015, even as growth in the country’s GDP (gross domestic product) came in way above forecasts in 3Q15. The lira had been trading on a weaker note in the wake of lower crude prices following increased supply by OPEC (Organization of the Petroleum Exporting Countries).
Also, sanctions against Russia combined with the downing of the Russian warplane by Turkey is hurting investments, as Russia is an important supplier of energy in the form of natural gas to Turkey. Foreign investments are primarily seeing outflows from Turkish markets, and a large external debt makes the lira vulnerable to future losses. As the FOMC (Federal Open Market Committee) meeting approaches, speculations of huge capital withdrawals in the event of a hike in US interest rates has been weighing heavily on the lira.
GDP growth exceeds forecasts in third quarter
The Turkish economy grew by 4.0% on a YoY (year-over-year) basis in the third quarter against an expansion of 3.8% in the previous quarter. 3Q15 growth exceeded highly conservative forecasts of 2.8%. It was the fastest growth since the first quarter of 2014. On a quarter-over-quarter basis, GDP grew by a slower 1.3% in comparison to a 1.4% increase in the second quarter. Also, Turkey recorded a current account deficit of $133 million in October against a surplus of $95 million dollars in the previous month.
Impact on the market
The iShares MSCI Turkey ETF (TUR) fell by 2.8% on December 10, 2015. The ETF has fallen by more than 10% since the Turkish Air Force downed a Russian warplane, increasing tensions between the nations. On the broad-based side, the iShares MSCI Emerging Markets (EEM) was on a negative bias and fell by 0.68%.
In terms of American depository receipts (or ADRs) trading in the United States, Turkcell Iletisim Hizmetleri (TKC) declined sharply by 5.3%. Russian ADR Mobile TeleSystems (MBT) rose by 1.2% while US natural gas producer Kinder Morgan (KMI) ended on a higher note by 1.2%.
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