Lira Slumps as Traders Brace for U.S. Response to S-400 Delivery

(Bloomberg) -- The Turkish lira extended its decline as investors braced for the fallout from the nation’s purchase of a Russian missile-defense system, a transaction U.S officials have long threatened to respond to with sanctions.

The lira fell more than 1.8% to the lowest level since Monday after senior U.S. Defense Department officials said they will address the issue at 11:15 a.m. in Washington. Turkey started receiving the first major cargo of the S-400 batteries earlier on Friday.

Though the delivery had been well flagged, traders are on edge as they await clarity on the response from Washington, which is concerned the arsenal will undermine NATO’s military capabilities. President U.S. Donald Trump’s suggestion last month that he may spare Turkey the worst of sanctions fueled optimism the penalties would be mild.

Read More: Turkey Receives Russian S-400 Missile System Opposed by U.S.

“Sanctions are unavoidable. It is merely a question of how punitive they are and when they are implemented.” said Julian Rimmer, a trader at Investec Bank Plc in London.

Read more: Turkish Stock Traders Hedge for Losses as S-400 Delivery Starts

The lira was trading 1.6% lower at 5.7684 against the dollar as of 4:17 p.m. in Istanbul.

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