Turkish lira sinks to record low on corruption tensions and Fed decision
Turkey’s lira fell to record lows on Friday and 10-year bond yields rose to three month highs, rattled by domestic political tensions and the US Federal Reserve’s decision to start trimming its giant program of monetary stimulus.
To contain market volatility, the Turkish central bank said that it may sell as much as 10 times the amount previously announced at its forex auctions. With the lira one of the developing world currencies most exposed to the shift in global capital prompted by the Fed, the bank has been selling a minimum of between $50 and $100 million regularly, while also stemming domestic banking liquidity, to try to stabilize the lira in lieu of raising official interest rates.
A total of 50 people including three cabinet ministers’ sons, prominent businessmen and local government officials, have been detained this week in a corruption crackdown that Prime Minister Recep Tayyip Erdoğan termed a “dirty operation” to tarnish the government. Dozens of senior police officers have since been removed from duty accused of abuse of office for keeping the investigation quiet from higher level officials in security institutions.
“These developments further point towards a genesis in AKP-Gülen conflict rather than any specific corruption issue which can be resolved easily,” a note from Commerzbank said. “Such turmoil could intensify in other areas too leading up to the March elections.” Turkey will hold local elections in March.
The lira traded at an all time low of 2.0902 against the dollar compared to 2.0780 late on Thursday. The yield on the 10-year benchmark bond was at 10.12 percent, compared to 10.19 percent on Thursday, the highest since Sept. 6.
20.12.2013
SOURCE: MEDIA
