The Turkish lira continued to fall today after halting its recovery last week. For now, it looks like the decline did not affect other currencies.
On Friday, Standard & Poor’s cut Turkey’s credit rating, announcing:
S&P Global Ratings lowered its unsolicited long-term foreign currency sovereign credit rating on Turkey to ‘B+’ from ‘BB-‘ and its unsolicited long-term local currency sovereign credit rating to ‘BB-‘ from ‘BB’. The outlook is stable.
The rating agency cited the lira’s volatility as the major reason for the downgrade:
The downgrade reflects our expectation that the extreme volatility of the Turkish lira and the resulting projected sharp balance of payments adjustment will undermine Turkey’s economy. We forecast a recession next year.
Markets showed muted reaction to the news, suggesting that they no longer fear that the Turkish crisis is contagious.
With that said, the German Finance Ministry stated today that the Turkish crisis poses a threat to the German economy. Other threats are the Brexit and US trade policies.
USD/TRY rose from 5.9728 to 6.1096 as of 11:22 GMT today. EUR/TRY gained from 6.8337 to 6.9800.
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