The U.S. dollar experienced widespread gains on Friday as the financial and political reality in Turkey led investors to the relative safety of the greenback.
The dollar has extended those gains against its European and emerging market rivals as the situation worsened over the weekend. Indeed, the Bloomberg Dollar Spot Index is at its highest level since June of 2017.
The biggest losers outside of the Turkish lira are the risk sensitive currencies such as the Australian dollar and the South African rand. The Aussie is at its weakest level since January of 2017 while the rand is the worst level since June of 2016.
There is no major data slated for today so we will look to see if the greenback can establish itself in new, stronger ranges or if the gains will be short-lived. Retail Sales and industrial production will cross the wire on Wednesday and represent the biggest fundamental releases of the week.
The Euro broke lower in overnight trading and briefly touched its weakest level in thirteen months. EUR/USD is attempting to climb higher in early trading today but the Euro’s weakness is likely to persist. European equities have sold-off on worries that European banks have high exposure to Turkey. In addition, Italian bond yields spike back to near their highs from earlier this summer, putting downward pressure on the Euro.
There was no fundamental data released in the Eurozone today so expect the common currency to continue to trade on Turkish and Italian bond news.
The safe-have Japanese yen has found favor among investors as the Turkish drama has caused global equities to decline. The MSCI Asia Pacific Index sank fell nearly 2.0% and European equities are extending their steep declines from Friday. U.S. futures also point to a lower open.
After popping higher in July, USD/JPY is headed back down to lows not seen since the end of June.