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Rand, lira rebound as Turkey concerns recede

Hong Kong - Financial markets showed signs of resilience following a failed coup attempt in Turkey, with the Turkish lira leading a recovery in emerging-market currencies and shares in Asia excluding Japan holding near their highest level since October. Haven assets including the yen and gold fell.

The lira recovered about a third of its loss from Friday, when news that army officers had tried to seize power triggered the currency’s steepest slide since 2008. South Africa’s rand advanced with the Mexican peso, while the yen extended its biggest weekly decline since 2009. 

Futures on the S&P 500 Index gained, while the MSCI Asia Pacific excluding Japan Index was little changed following its largest weekly jump in four months. Gold sank to this month’s low. Financial markets are shut on Monday in Japan and Thailand for holidays.

The failed putsch in Turkey came less than a week after global equities had recovered from the selloff that followed the UK’s June 23 vote to leave the European Union, an event that wiped out almost $4trn of market value over two trading days. Turkish officials over the weekend sought to limit the impact on financial markets by promising unlimited liquidity to lenders and measures to support the lira.

“Geopolitical risk has reared its head again,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages more than $110bn. “But it’s at least the fourth coup in Turkey since 1960 and I suspect no lasting impact on global markets.”

Hermes Asset Management is among investors seeing potential for a relief rally in Turkish assets even amid longer-term concern about the country’s political and economic situation. Rabobank and CrossBorder are predicting outflows from Turkey. Turkey’s deputy prime minister posted on Twitter that there’s “no need to worry”.

Currencies

The lira jumped 1.7% versus the dollar as of 10.21am Hong Kong time, after sliding 4.6% on Friday. The rand advanced 1.3%, having dropped 2.4% in the last session as news of Turkey’s coup attempt prompted investors to sell emerging-market assets.

Turkish President  Recep Tayyip Erdogan ordered reprisals after the failed takeover by the military led to the deaths of more than 190 civilians. An exchange-traded fund tied to the country’s shares fell 2.5% on Friday in New York.

The yen fell 0.7% to ¥105.63 per dollar, after tumbling 4.1% last week as Prime Minister Shinzo Abe outlined plans for a “bold” stimulus package in the wake of an election victory.

New Zealand’s dollar weakened 0.6% versus the greenback after a report showed inflation was slower than economists and the central bank forecast. Most economists predict the central bank will respond to persistently weak inflation by cutting its benchmark interest rate to 2% at the next review on August 11, even as an overheated housing market poses a risk to financial stability.

The Bloomberg Dollar Spot Index gained 0.1%. It climbed 0.4% in the last session as US reports showed retail sales rose more than economists predicted last month and manufacturing posted the strongest advance since January. The odds of the Federal Reserve increasing interest rates by December more than doubled last week to 44%, Fed Funds futures show.

“The market has priced in slightly more for the rate hike next year in response to the numbers that we saw last Friday," said Irene Cheung, a foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group. "I’m not sure whether the Turkey situation has really stabilised and, if there’s any concern, it should be good for the dollar.”

Stocks

The MSCI Asia Pacific excluding Japan Index rose 0.1%, after surging 4.5% last week. Benchmarks gained in Australia and Taiwan, while the Shanghai Composite Index retreated 0.5%.

Malaysia Airports Holdings,  owner of Istanbul’s second-biggest airport, tumbled more than 5% on concern fewer people will visit Turkey following the attempted coup.

Futures on the S&P 500 index rose 0.2% and contracts on the UK’s FTSE 100 Index gained 0.3%. Bank of America, Charles Schwab and International Business Machines are among American companies reporting earnings on Monday.

Commodities

Crude oil added 0.1% to $45.99 a barrel in New York. It gained 0.6% in the last session as news broke of the coup attempt in Turkey, a vital conduit for oil passing from Russia and Iraq to the Mediterranean Sea.

Gold declined 0.6% to about $1 330 an ounce. The metal is in a major bull market and may surge to more than $1 500 as low interest rates buoy demand and the US presidential election looms, according to DBS Group Holdings.

Bonds

New Zealand’s bonds due in a decade advanced after the inflation data, pushing their yield down by one basis point to 2.35%. There’s a 72% chance of an interest-rate cut at the central bank’s August meeting, based on derivatives prices tracked by Bloomberg.

The yield on similar-maturity Australian debt increased by three basis points to 2.01%.

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Rand - Dollar
18.88
+0.3%
Rand - Pound
23.86
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
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Industrial 25
103,936
0.0%
Financial 15
16,502
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