- The USD/Try retreated from its historical maximum of 41.70, reached during the first hours of European negotiation on Wednesday.
- The political risks in Türkiye intensified when the mayor of Istanbul, Ekrem Imamoglu, was arrested this morning.
- President Trump fired two Democratic commissioners of the Federal Commerce Commission (FTC).
The USD/Try rides from its historical maximum of 41.70, reached during the first European negotiation hours on Wednesday, around 38.70 at the time of writing. The pair shot as the Turkish lira weakened drastically amid the growing political uncertainty in Türkiye.
The state station TRT, citing the Istanbul Prosecutor’s Office, reported that the mayor of Istanbul, Ekrem Imamoglu, the main political rival of President Recep Tayyip Erdogan, was arrested this morning as part of investigations for corruption and terrorism.
In addition, the Anadolu state agency reported that detention orders were issued for approximately 100 people more linked to Imamoglu, including its Murat NGOn press advisor, who was expected to be the presidential candidate of the Republican Party of the People (CHP). This movement is widely seen as an attempt by Erdogan to consolidate his power to marginalize possible challenges, causing turbulence in Turkish financial markets.
Meanwhile, the USD/try also receives support from a US dollar (USD) strengthened, backed by stable yields of treasure bonds, while investors expect the decision on interest rates of the Federal Reserve (Fed) later a day. Fed is expected to maintain stable rates amid persistent concerns about inflation and economic uncertainty. The operators are attentive to the updated economic projections of the FED in search of clues about the future policy of interest rates in the US. Any hard line signal could further strengthen USD against its peers.
In addition, the Wall Street Journal reports that US President Donald Trump has fired two Democratic commissioners of the Federal Commerce Commission (FTC). However, there are doubts about his authority to do so, which has generated speculation about whether this movement establishes a precedent for possible layoffs of the president of the Federal Reserve (Fed), Jerome Powell, and other members of the Federal Reserve.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
