The Turkish lira has been one of the most volatile currencies this year. We saw the huge sell off in August, and then the long way back versus the USD, from 7.2 to almost 5, a gain from August panic levels of almost 30%.
The volatile currency has been trading relatively stabile over past weeks, but last few days has once again been volatile for the Turkish lira.
Traders seem to be focusing on the central bank possibly easing policy faster than what is warranted by the inflation outlook.
The second aspects is the recent gain in oil. Turkey imports approximately 90% of its oil. Higher fuel input can weigh on the trade balance and translate into higher prices.
The Turkish lira (white) has been moving in tandem with oil (orange) recently.
Europe has the Brexit, the Italian saga and lately the Macron situation to focus on, but don´t forget that the biggest exposure towards Turkey is to be found in Europe.
The country with the highest exposure to Turkey is Spain, and the single most exposed company is BBVA. The below chart shows the lira (inverted white) versus BBVA (orange). The two have been moving in tandem for long, but note that BBVA actually refused to move higher while the Turkish lira did the last bullish move.
If the Turkish lira starts becoming a focus again, investors could start looking for who has what exposure to Turkey.
If you are looking for Italian and Turkish exposure in one, look at UniCredit. Italy´s second biggest bank has a lot of quality assets in Poland for example, but should focus shift to Turkey and Italy again, recent bounce in UniCredit could be ready to fade some as exposure in Turkey is rather significant.
Chart showing UniCredit (orange) versus the lira (inverted white).
Source; charts by Bloomberg