Nov 23, 2017 (Reuters) – The lira fell 8% to 12.49 against the dollar Tuesday due to increased worries about Turkey’s unconventional monetary policies. Russia’s rouble recovered, but fears about a war in Ukraine kept it at its four-month lows.

Turkish President Tayyip Erdan, who has long demanded stimulus to boost economic growth, supported lower policy rates Monday and promised to win his “economic war for independence”. Inflation is now at 20% while the policy rate stands at 15%.

Worries were further intensified by speculation that Erdogan may soon replace Lutfi Elvan, Finance and Economy Minister.

The lira TRY= and TRYTOM=D3 has fallen more than 37% to the dollar in 2021. This is significantly lower than other emerging market peers. Volatility gauges are also spiking.

“We’d have to start to see strains in the banking sector.XBANK before there would be any change of course. Banks have fared well so far. As long as this continues, I believe the central bank won’t raise rates,” stated Jason Tuvey, Capital Economics senior EM economist. He also suggested that the lira could fall beyond 13.

After sliding to close to 75 in the last session due to Western concerns about possible Russian military intervention, Russia’s ruble RUB= gained 0.5% against its greenback.

Russian OFZ Treasury Bonds were affected by the market sell-off. Yields on benchmark 10-year OFZs RU10YT=RR rose to 8.63% this Week, an increase that was not seen since early 2019.

On Monday, the United States imposed additional sanctions on Nord Stream 2’s gas pipeline. These sanctions were aimed at Transadria Ltd, a Russian-linked company, and its vessel.

Tuvey stated that Russia could try to invade Ukraine. If the rouble comes under serious pressure, sanctions would quickly escalate. Tuvey suggested that the central bank might consider raising interest rates.

Ukraine dollar bonds UA130392547= and UA130392504= fell to their lowest levels in one year.

As the migrant crisis grew, the BYN= rouble in Belarus fell to three months lows. After President Alexander Lukashenko threatened to go to war over the crisis, Austria stated that Europe should not be forced into accepting thousands upon thousands of migrants stranded at its border with Belarus.

U.S. President Joe Biden appointed Jerome Powell, Federal Reserve chief, to lead for a second term. This raised concerns that the central bank might tighten policy quicker than anticipated, which could mean that funds are being pulled away from EM assets. FRX/

EM stocks.MSCIEF fell to six weeks lows with gains in India, Turkey, and mainland China compensating for losses.

BlackRock stated Monday that while central banks in emerging economies will increase interest rates, it could be detrimental for equity markets.