FX round-up: Turkish lira extends rally, yuan slide continues

Sterling edged lower again on Tuesday, in another session dominated by jitters around the situation in Turkey and ongoing doubts about whether other Emerging Markets would be caught in the fallout.

Traders were also keeping an eye on Chinese assets, amid continued weakness in the yuan.

To some market watchers' surprise, the Greenback was retreating by 5.17% to 6.0222 against the lira as of 1713 BST, after the central bank in Ankara moved to restrict lenders' ability to speculate in currency markets.

In parallel, the US dollar spot index was edging up by 0.09% to 96.8210 as the Greenback added 0.74% against the Chinese yuan.

Meanwhile, the pound was 0.19% lower against the US dollar to 1.26990, alongside a fall of 0.45% in the US dollar/yen pair to 110.651.

To take note of, the Loonie was also on the back foot, retreating by 0.71% to 1.31512 against the US currency.

Elsewhere, the US dollar was 0.54% higher versus the Argentine peso at 29.8748, by 1.48% against the Russian rouble to 67.2975 and by 1.64% in its cross against the Mexican peso to 19.1927.

Critically, analysts said, recent actions by the Turkish central bank were in fact having an effect equivalent to an interest rate hike - without in fact raising them.

Nevertheless, according to some economists, the recent slide in the Turkish lira was expected to push the year-on-year rate of consumer price inflation in the Mediterranean country towards roughly 25% by September, dragging interest rates higher still and tipping the economy into a contraction in the last quarter of 2018.

Ankara's decision to opt for a heterodox response to the currency crisis was also expected to add to the country's woes over the medium-term.

In a related move, overnight Indonesia's central bank hiked its main policy lever, the seven-day repurchase rate, by 25 basis points to 5.50%, even as the country's currency was teetering near its weakest level in five years against the US dollar.

Traders were also keeping close tabs on the South African rand, against which the US dollar was tacking on a further 2.57% to 4.6140.

On a more positive note, Robin Brooks, the International Institute for Finance's chief economist, reportedly said 'fair value' for the lira was nearer to 5.0 to 5.5.

Brooks reportedly also forecast the currency would strengthen over the next year or two, as the economy slowed, but exports improved, boosting the country's balance of payments.