The Turkish lira weakened for a second day on concern automatic spending cuts in the U.S. will weaken global growth and as China’s manufacturing gauge fell, hurting appetite for riskier assets.
The lira extended its losses this year as the U.S. Senate rejected a pair of partisan proposals to replace $85 billion in across-the-board spending reductions which the International Monetary Fund said will weaken growth. China’s official Purchasing Managers’ Index slid to the lowest level in five months.
“This is very bad news for stocks and emerging markets,” Burcin Metin, the head of currency trading at ING Bank AS in Istanbul, said by phone. “Cutting spending means less growth in America and this is negative for all nations.”
The lira depreciated 0.2 percent to 1.8019 per dollar at 1:06 p.m. in Istanbul, bringing its loss this year to 1 percent. Yields on two-year benchmark bonds rose two basis points, or 0.02 percentage point, to 5.71 percent.
Foreign investors bought $17.7 billion of Turkish bonds in the year ending Feb. 22, raising total ownership to $64.2 billion. Turkey’s two-year bond yields dived 350 basis points last year in the biggest retreat among 20 emerging markets tracked by Bloomberg and the lira gained 6 percent.
Turkey’s central bank cut interest rates twice this year as it said the “proper policy would be to keep interest rates low” amid “amid strong capital inflows.”
“The central bank does not want the lira to appreciate too much and levels stronger than 1.80 were not very realistic for the lira,” Metin said.
China’s official PMI gauge slipped to 50.1 in February, from 50.4 in January, a report from the National Bureau of Statistics and China Federation of Logistics and Purchasing showed today in Beijing. A separate gauge from HSBC Holdings Plc and Markit Economics dropped to a four-month low of 50.4 from 52.3. Readings above 50 indicate expansion.
Oil in New York slumped 1.1 percent to $91.08 per barrel, heading for its lowest level this month. The Stoxx Europe 600 Index slid 0.6 percent and S&P 500 Index futures lost 0.3 percent.
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