Feb 5, 2019

Ignoring the experts has paid off for Turkey

Data: FactSet; Chart: Andrew Witherspoon/Axios

The two major market horror stories in 2018 were Turkey and Argentina, with both economies sputtering toward recession and on the verge of currency crises.

The big picture: The two countries' policies to address the crises have played out like a strip from Goofus and Gallant, except that Goofus has emphatically triumphed.

Background: Investors have long urged countries to fight economic instability and currency falls by increasing interest rates, assuring central bank independence and relying on the IMF and international organizations for goodwill loans.

On one side: On Aug. 29, Argentina as Gallant asked the IMF to speed up payments of the $50 billion bailout package it had agreed to with the country. On the same day, its central bank, led by technocrat Nicolas Dujovne, raised benchmark interest rates to a stupefying 60%. (Interest rates had been as low as 22.75% just 4 months earlier.)

  • The Argentine peso fell that day to nearly 40 pesos per dollar, its lowest level on record and has not bounced back.

On the other side: Turkey as Goofus has defied economic experts and raised its interest rates only once since the lira fell to the weakest level in its history. The country hiked rates 6.25% to bring its policy rate to 24%.

The results: The lira has strengthened more than 20% from its Aug. 28 level. Argentina's peso has fallen more than 15%.

  • Turkey's annual inflation rate also has fallen, topping out in October at 25%, while Argentina's climbed to 47% in December.

The bottom line: "I'm puzzled because I don’t think anything has really changed in Turkey," Win Thin, head of global currency strategy at Brown Brothers Harriman, tells Axios. "Part of it I think is just that quest for yield, though I'm not sure why people would pick Turkey over Argentina. It's frustrating if you're following fundamentals."

Go deeper: The meltdown of emerging market currencies

Go deeper

Trump administration asks Congress for $2.5 billion to fight coronavirus

President Trump with Health and Human Services Secretary Alex Azar at the White House in September. Photo: Chip Somodevilla/Getty Images

The Trump administration sent a letter to Congress Monday requesting a funding commitment of at least $2.5 billion to help combat the spread of the novel coronavirus.

Details: The request for a lump sum account for the Department of Health and Human Services includes $1.25 billion in new funds to fight COVID-19 and $535 would come from untouched funds for the Ebola virus.

WHO won't call coronavirus a pandemic as cases spread

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

The World Health Organization will not yet call the coronavirus a pandemic, claiming that needs across affected countries are too varied and the classification would increase fear, per a briefing Monday.

The big picture: As South Korea and Italy stepped up emergency measures in efforts to thwart the spread of the virus, WHO expressed concern about infections with no clear link to China. COVID-19 has killed at least 2,620 people and infected almost 80,000 others, with all but 27 deaths occurring in mainland China.

Go deeperArrowUpdated 4 hours ago - Health

The global scramble to contain the coronavirus

Taking precaution, in the Philippines. Photo: Ezra Acayan/Getty Images

The coronavirus is spreading quickly in cities nowhere near Wuhan, China, and the window to prevent a global pandemic is narrowing.

Zoom in: Here's a look at what comes with a coronavirus outbreak in communities outside China that have been hardest hit so far.

Go deeperArrow4 hours ago - World