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29 Jan 2014
Asia Recap: Turkish central bank re-activates 'risk on' environment
FXstreet.com (Bali) - It was a lively risk on Asia session, with most of the moves occurring very early in the transition between New York and Tokyo.
The AUD was the big winner, with the Japanese Yen the main laggard, in what represents a clear expression of the 'old fashion' risk-on vs risk-off trading mentality, not usually seen these days anymore as the environment is a lot more complex from at a macro level.
The catalyst causing a classic short squeeze in risk-off trades in twilight markets came after the Turkish central bank decided to lift interest rates by 4.25% in one single meeting, in order to combat excessive outflows.
According to Kathy Lien, Co-Founder at BK Asset Management: "Turkey's decision to raise rates by 425bp reflects level panic inside the central bank and is a sign of their commitment to end the crisis of confidence in their currency. They are sending a strong message to the market they will do whatever it takes attract investment back into their country."
"For the rest of the world, today's bold move by Turkey mitigates the risk of spillover and reduces uncertainty. It also makes the Federal Reserve's decision tomorrow to taper much easier", Lien adds.
The Japanese Yen was, as said, the expression of defeat on a friendly risk environment, also underpinning the Nikkei 225, which after the overnight gains in its futures market, extended to the upside over 300 points above the 15,000 handle, to gain over 2% for the day.
As per the New Zealand Dollar, 0.83 vs the USD continues to hold extraordinarily well, with news from the RBNZ about a dramatic fall on high loan-to-value ratio (LVR) mortgage lending not helping the Kiwi, as it means the RBNZ may delay interest rate hikes as the CB finds an effective tool to slow down speculation into the housing market.
The Euro traded a tad weaker, with talk in the market that if stability in emerging markets is achieved, outflows of capital off EMs into Eurozone bonds may recede, an outcome which would be negative for the Euro.
Main headlines in Asia
Moody's: New Zealand's economy and finances improving
Turkish central bank surprises by lifting lending rates to 12%
'Risk on' markets after extraordinary rate hike by Turkish central bank
Turkish CB move favours perception of further Fed taper
Despite CBRT move, Turkey’s case a lose-lose situation - TD Securities
Turkish CB hawkish surprise not as shocking as it seems - BBH
Obama delivers SOTU speech: calls for 'year of action'
RBNZ’s macro-prudential controls working, RBNZ rate hike delayed?
RBNZ not to hike rates until March - Westpac
The AUD was the big winner, with the Japanese Yen the main laggard, in what represents a clear expression of the 'old fashion' risk-on vs risk-off trading mentality, not usually seen these days anymore as the environment is a lot more complex from at a macro level.
The catalyst causing a classic short squeeze in risk-off trades in twilight markets came after the Turkish central bank decided to lift interest rates by 4.25% in one single meeting, in order to combat excessive outflows.
According to Kathy Lien, Co-Founder at BK Asset Management: "Turkey's decision to raise rates by 425bp reflects level panic inside the central bank and is a sign of their commitment to end the crisis of confidence in their currency. They are sending a strong message to the market they will do whatever it takes attract investment back into their country."
"For the rest of the world, today's bold move by Turkey mitigates the risk of spillover and reduces uncertainty. It also makes the Federal Reserve's decision tomorrow to taper much easier", Lien adds.
The Japanese Yen was, as said, the expression of defeat on a friendly risk environment, also underpinning the Nikkei 225, which after the overnight gains in its futures market, extended to the upside over 300 points above the 15,000 handle, to gain over 2% for the day.
As per the New Zealand Dollar, 0.83 vs the USD continues to hold extraordinarily well, with news from the RBNZ about a dramatic fall on high loan-to-value ratio (LVR) mortgage lending not helping the Kiwi, as it means the RBNZ may delay interest rate hikes as the CB finds an effective tool to slow down speculation into the housing market.
The Euro traded a tad weaker, with talk in the market that if stability in emerging markets is achieved, outflows of capital off EMs into Eurozone bonds may recede, an outcome which would be negative for the Euro.
Main headlines in Asia
Moody's: New Zealand's economy and finances improving
Turkish central bank surprises by lifting lending rates to 12%
'Risk on' markets after extraordinary rate hike by Turkish central bank
Turkish CB move favours perception of further Fed taper
Despite CBRT move, Turkey’s case a lose-lose situation - TD Securities
Turkish CB hawkish surprise not as shocking as it seems - BBH
Obama delivers SOTU speech: calls for 'year of action'
RBNZ’s macro-prudential controls working, RBNZ rate hike delayed?
RBNZ not to hike rates until March - Westpac