It was chaos in forex markets today, particularly for two currencies: the Chinese yuan and the Turkish lira.
First, the yuan fell to a 2023 low after China’s exports cratered 7.5 percent year-over-year. Economists had expected a drop of 1.8 percent. Imports also tanked by 4.5 percent from the same time a year ago, which was better than the market estimate of -8 percent.
This was not necessarily surprising because China has been reporting abysmal economic data in recent months, especially in the manufacturing sector.
The government’s manufacturing purchasing managers’ index (PMI) has been stuck in contraction territory for two consecutive months.
The USD/CNY rose to about 7.1300. Year-to-date, the yuan is down more than three percent against the greenback.
Meanwhile, the Turkish lira crashed to a record low against the US dollar.
From FX Daily Report:
The Turkish lira crashed to a record low on Wednesday and suffered the sharpest selloff since 2021. But the silver lining in the currency crisis is that Turkey might be shifting away from state controls to a free market. Still, it does not bode well for the confidence of the lira or the broader economy.
Since President Recep Tayyip Erdogan secured his re-election bid in May, the lira has been crashing against every major currency. Year-to-date, the lira has plummeted more than 24% against the greenback, and about 35% over the last 12 months.
In addition to the electoral outcome, new reports are emerging that state lenders have ceased selling US dollars to defend the lira. This decision might have been supported by the new directive of the incoming finance minister.
Erdogan recently appointed former Finance Minister Mehmet Simsek, who served in this position from 2015 to 2018. Simsek recently noted that the country will need to adopt a more “rational economic policy” and suggested a more freely floating lira.
The USD/TRY soared 7.6 percent to nearly 23.2200 on Wednesday.
Year-to-date, the lira has plunged more than 24 percent against the greenback.
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