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Turkey 

Erdogan, Turkey’s president, has stated that the lira will stabilise next week. 

Erdogan encourages Turkish residents to maintain their money in Turkish currency. 

In case you missed it, here are some highlights from the previous week: 

Erdogan’s experimental approach for reversing the lira’s fortunes has failed to persuade. 

He goes on to explain that they have reined in “meaningless” currency volatility and are taking steps to prevent lira volatility. The USD/TRY is back over 13.00 on the day and poised to rise further as market participants remain persuaded by Erdogan’s new trick.

Dollar 

• The Fed is one of the frontrunners, and it may be the most aggressive. Three rate rises are planned for next year, the first of which should occur by June at the latest. The Fed has shifted fast from “this is temporary” to “we need rate rises asap,” which has agitated the market. The long end of the yield curve remains unconcerned, but it will be interesting to watch how aggressive the Fed decides to be next year and where they see the current cycle ending.

• If the highest ceiling is set at 2%, it will be difficult to get yields enthusiastic, in my opinion. However, this may be an argument that emerges only in the second half of next year. For the time being, the question is how much the Fed can keep its promise. And, if all goes as planned, the dollar should be able to maintain its resilience as a result of the Fed’s policy stance. Another important issue to watch out for in the next year is China’s fight against the epidemic. If this results in further supply constraints, it will bolster the preceding argument.

• And if it leads to a significant global slowdown and risk trades correct, that will be another situation in which the dollar might shine, i.e. a flight to safety. As a result, one may claim that the dollar grin hypothesis will benefit the currency in the early part of next year. Or, at the very least, it should give some tangible support for the dollar, making it more robust. The major caveat is that if the Fed fails to follow the script, which is improbable. It will be determined by a variety of things, including China and the pandemic, but the dollar should at least hold up.

China PMIs 

These are the official PMIs from China’s National Bureau of Statistics. 

Manufacturing marginally outperforms expectations, coming in at 50.3 (vs. 50.1), up from 50.1 before. 

Non-manufacturing (services) is down but up from November at 52.7, projected 53.1, before 52.3.  Composite 52.2 , prior 52.2. 

Given the ongoing coronavirus outbreaks and the attendant limitations that China frequently imposes, these are realistic outcomes. All of them are growing. 

The Winter Olympics in China begin in approximately a month (on February 4). Its curios to see if China will modify its zero-tolerance policy for epidemics (and consequently the tough limitations) after the outbreaks are finished.

South Korea

• South Korea will prolong social separation laws for another two weeks, until mid-January. 
• Due to an increase in COVID-19 instances, stricter social distancing regulations were implemented beginning December 18. 
• The restrictions that went into effect on December 18 were supposed to expire on Sunday, but they have been extended until January 16. Among the metrics are: 
  • Private meetings in the United States are limited to four individuals. 
  • while curfews of 9 or 10 p.m. are enforced on the business hours of multiuse facilities 
• Prime Minister Kim Boo-kyum has sought to advance COVID-19 damage compensation for the first quarter: 
  • Approximately half a million (just over) self-employed persons will earn approximately US$4,200 apiece.