SYDNEY (Reuters) - The euro was under pressure in Asia on Monday as fears about the exposure of European banks to crisis-hit Turkey sent investors scurrying to safe havens including the U.S. dollar, Swiss franc and yen.
Turkish Lira and Euro banknotes are seen in this picture illustration taken June 25, 2018. REUTERS/Dado Ruvic/Illustration
Regional stocks also looked likely to suffer as Turkey’s troubles tainted emerging markets in general, while boosting highly rated sovereign bonds.
Nikkei futures NKc1 were pointing to an opening loss of around 200 points, while EMini futures for the S&P 500 ESc1 were off 0.25 percent. Treasury futures TYc1 were up a tick.
Much of the early action was in currencies with the euro gapping lower as the Turkish lira TRYTOM=D3 took another slide to all-time lows around 7.2400.
It was last at 6.7900, having found a sliver of support when Turkish Finance Minister Berat Albayrak said the country had drafted an action plan to ease investor concerns and the banking watchdog said it limited swap transactions.
The currency tumbled more than 40 percent this year on worries over Turkish President Tayyip Erdogan’s increasing control over the economy and deteriorating relations with the United States.
“The plunge in the lira which began in May now looks certain to push the Turkish economy into recession and it may well trigger a banking crisis,” said Andrew Kenningham, chief global economist at Capital Economics.
“This would be another blow for EMs as an asset class, but the wider economic spillovers should be fairly modest, even for the euro zone,” he added.
Kenningham noted Turkey’s annual gross domestic product of around
