Last updated: August 28, 2013 5:07 pm

Lira hits new low as EM concerns intensify

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Sustained selling hit many emerging market currencies, pushing both the Indian rupee and the Turkish lira to fresh record lows against the dollar.

The dollar was up 3.8 per cent to Rs68.80 against the Indian currency, a new record high. The rupee has now fallen 7.8 per cent this week.

Against the Turkish currency, the dollar climbed 1.1 per cent to TL2.0550, having touched a record TL2.0730.

The lira has lost a more modest 3.5 per cent this week but still a heavy bout of selling in currency terms.

Turkey’s central bank on Tuesday said it would not raise its main interest rate again this year, following a half-point rise to 7.75 per cent earlier this month, in spite of inflation, which in July was running at 8.8 per cent.

The lira has also come under pressure in recent sessions as tensions mount in the region concerning Syria and the rising threat of military intervention from the west.

“Markets already appear well positioned for a Syria driven bout of risk aversion,” said Todd Elmer at Citigroup. “We are seeing a continuation of the recent trend towards risk reduction in emerging markets, including regional currencies such as Turkish lira and the Israeli shekel.”

The shekel eased 0.2 per cent to Shk3.6623.

South Africa’s rand came under renewed pressure. The dollar climbed 1.2 per cent to a four-year high of R10.5048, before easing back to trade 0.4 per cent higher at R10.3392. On Tuesday, GDP data showed growth continued to slow.

“Owing to the lack of large-scale FX reserves and the difficulty of raising interest rates with unemployment over 25 per cent, there is little the Reserve Bank can do to support the currency,” said Peter Kinsella at Commerzbank.

In Europe, sterling fell 0.1 per cent to $1.5533, but was off its earlier lows after a speech by Bank of England governor Mark Carney that did little to alter perceptions about the timing of any future rate increases.

The pound rose 0.4 per cent to £0.8578 against the euro.

The yen, having gained strong haven support on Tuesday, gave up some of its gains. The Japanese currency lost 0.7 per cent to Y97.73 versus the dollar.

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