Aurelia Butler

ISTANBUL (Reuters) – The Turkish lira fell as much as 6% on Thursday, extending a four-day slide after last week’s big gains, as the government struggled to convince savers to ignore the volatility and worries over surging inflation and unorthodox rate cuts. While Finance Minister Nureddin Nebati said Turks’ dollar holdings have been falling, official data showed local holdings of hard currencies soared to a record billion last week. At the same time the central bank’s net foreign currency holdings – its effective buffer against financial crisis – plunged to nearly a two-decade low.The lira has shed as much as 20% in four trading sessions, reversing a more than 50% rally over the previous five days triggered by a new state scheme to protect local deposits from depreciation losses versus hard currencies.However, Thursday’s data showed that most of last week’s lira appreciation in fact had been driven by central bank intervention, said Per Hammarlund, chief EM strategist at SEB. “(The locals) are not rushing to convert their dollar savings into lira, that is for sure,” Hammarlund added. On Thursday, the lira weakened to 13.4 to the dollar before recovering to 13.00 by 1630 GMT, still down 4.7% on the day. Swinging from 18.4 to 10.25 over the last two weeks, the lira’s dizzying ride has seen Turks’ savings depleted and household budgets upended. The fast-moving currency crisis was set off by a series of aggressive interest rate cuts beginning in September that were sought by President Tayyip Erdogan under his “new economic programme” focused on exports and credit. Economists and opposition lawmakers called the easing reckless given inflation had climbed above 21%, and is expected to soar beyond 30% this month and in the months ahead, due to the sharp lira depreciation. Nebati – whom Erdogan appointed earlier this month – said on Wednesday the volatility was not worrying and predicted single-digit inflation by 2023, which is much more optimistic than analysts’ views.Nebati also said there were no state interventions to sell dollars and boost the lira last week, despite data showing reserves fell in what bankers and economists said reflected state-backed market support.THIN BUFFERCentral bank data showed net international reserves hit $8.63 billion last week, their lowest since 2002, from $12.16 billion a week earlier. Gross forex reserves fell $5.81 billion to $72.56 billion.The central bank has announced five direct interventions this month to support the lira, which bankers say totaled $6-$10 billion. There were no intervention notices in the last two weeks, when the reserves began to plunge.Foreign currency and gold held by Turkish locals reached $238.97 billion last week. Adjusted for parity effect, holdings rose $1.46 billion, while those of individual investors alone fell by $136 million.Graphic: FX held by Turkish locals-https://fingfx.thomsonreuters.com/gfx/mkt/myvmnbmdlpr/FX%20held%20by%20Turkish%20locals.PNGThe scheme unveiled by Erdogan is meant to reverse the tide of dollarisation. Under it, the Treasury or central bank covers the difference between deposit rates and the foreign exchange and gold rate for lira converted into the new instrument. The scheme provided some backstop for the currency, said Marek Drimal at Societe Generale (OTC:SCGLY), though “market participants need to see tangible steps to address underlying problems in the economy.” Many economists and political analysts warn that if the lira continues to depreciate, the scheme could stoke inflation and add to the state’s fiscal burden.”Emergency measures put in place are only going to give short term relief; in the long term, they seem likely to exacerbate the crisis,” said Howard Eissenstat, associate professor of Middle East history at St. Lawrence University in New York State. Nebati told broadcaster CNN Turk that 59.8 billion lira ($4.60 billion) were in the protected deposits as of Wednesday and local investors’ foreign currency deposits declined by $7 billion to $162 billion since the scheme was announced.Some analysts say the scheme and a 50% minimum wage rise could pave the way for Erdogan to hold snap elections before scheduled in 2023.SEB’s Hammarlund predicted the lira would face more volatility in the weeks ahead. “They are just pulling one rabbit out of the hat after another, so it is hard to say what the next measure could be.”($1 = 12.9914 liras) More

The average for a 30-year loan was 3.11%, up from 3.05% last week, Freddie Mac (OTC:FMCC) said in a statement Thursday. Rates tracked a gain in yields for 10-year Treasuries, which climbed above 1.5% for only the second time this month, despite the recent jump in Covid-19 cases. Economic data suggest that the recovery “remains on firm ground,” with low interest rates and high asset valuations continuing to drive consumer spending, Sam Khater, Freddie Mac’s chief economist, said in the statement. Borrowing costs are still close to the historic lows that have stoked demand for a tight supply of homes throughout the pandemic, pushing buyers into bidding wars. A year ago, the 30-year average was 2.67%. It fell to a record low of 2.65% one week later.©2021 Bloomberg L.P. More

(Reuters) -New claims for U.S. unemployment benefits fell in the week leading up to Christmas and benefits rolls slid to their lowest level of the coronavirus pandemic era the week earlier, the Labor Department said on Thursday, data that showed no impact yet on employment from the rapidly spreading Omicron variant.Initial claims for state unemployment benefits dropped to a seasonally adjusted 198,000 for the week ended Dec. 25 from a revised 206,000 a week earlier. Early this month, claims dropped to a level last seen in 1969. Economists polled by Reuters had forecast 208,000 applications for the latest week. Claims have declined from a record high of 6.149 million in early April of 2020.The data were the latest to show that Omicron – the newest and most contagious COVID-19 variant so far – has yet to trip up a tight job market or slow a U.S. economy that appears solidly on track to end the year at a gangbusters growth rate.While the initial claims data was depressed by so-called seasonal adjustment factors, even the nonseasonally adjusted figures – while roughly 60,000 higher – showed almost no week-over-week change.”The fact that NSA claims were unchanged – at a time when they typically tend to deteriorate – suggests that there has been no impact from Omicron as of yet,” economists Thomas Simons and Aneta Markowska at Jefferies wrote.The figures – among the most timely reading on the health of the labor market – also showed the number of people on benefits beyond the first week fell to 1.716 million in the week ended Dec. 18, the lowest since the week of March 7, 2020. That essentially marks a return to the level that prevailed before the first wave of COVID-19 lockdowns later that month sent unemployment rolls soaring.”We expect continued claims to come in more consistently around 1.7 million given the low level of initial claims and as more individuals return to work as health conditions improve, although the Omicron variant might slow that process,” Nancy Vanden Houten, lead economist at Oxford Economics wrote.Applications typically increase during the cold weather months, but an acute shortage of workers has disrupted that seasonal pattern, resulting in lower seasonally adjusted claims numbers in recent weeks. Discounting the weekly volatility, the labor market is tightening, with the unemployment rate at a 21-month low 4.2% as of November. Employment figures for December will be released on Jan. 7, and the early consensus estimate among economists polled by Reuters sees the jobless rate edging still lower to 4.1%.There were a record 11.0 million job openings at the end of October. Higher wages as companies scramble for scarce workers are helping to underpin consumer spending.The economy grew at a 2.3% annualized rate in the third quarter, with consumer spending rising at a 2.0% pace. Growth forecasts for the fourth quarter are as high as a 7.2% rate. For the whole of 2021, the economy is expected to grow 5.6%, which would be the fastest since 1984, according to a Reuters survey of economists. The economy contracted 3.4% in 2020.Questions are now arising over how sustainable that momentum may prove to be with Omicron’s rapid spread pushing COVID-19 infections back to record highs, exceeding even last winter’s crushing wave. On top of that, the Biden administration’s $1.75 trillion domestic investment plan is stalled in the U.S. Senate. Against those uncertainties, some economists have begun cutting their growth estimates for next year. More

Holzmann, who is also Austria’s central bank chief, said inflation would peak around the turn of next year and then slowly weaken again.The Austrian National Bank expects consumer prices harmonized with inflation data from other European Union countries (HICP) to rise 3.2% in 2022, after an increase of 2.7% this year.At the same time, it expects HICP to rise 2.3% and 2.0% in 2023 and 2024, respectively. More

Investing.com – U.S. Initial Jobless claims were 198,000 for the week ending December 25, a drop of 8,000 from the prior week. The Department of Labor revised the previous week’s figure up 1,000. The 4-week moving average dropped to 199,250, the lowest level since October 25th, 1969.This comes amidst a hot job market and labor shortages in the U.S., part of the late pandemic economic climate. With the Federal Reserve pivoting to a more hawkish stance in their December meeting, there’s nothing in this report to alter their acceleration of tapering and the 3 mooted rate hikes for 2022.U.S. stock markets took the news in stride, with indices pointing towards a higher open. Dow Jones Futures were up .15%, as were S&P 500 Futures and the Nasdaq 100 Futures. This comes after a holiday week of record highs and quiet trading. More