Lira Watchers Expect U.S. Sanctions on Turkey Will Be Limited
The expectation that economic impact of U.S. sanctions on Turkey will be minimal may prevent a Lira rout.
(Bloomberg) -- U.S. sanctions on Turkey that lira traders have been dreading will probably be announced in the coming days, but the expectation that their economic impact will be minimal may prevent a rout.
“Near term, they would not affect perception of risk in Turkey as much the lack of credibility in interest rate policy,” said Dubai-based Hasnain Malik, the head of equity strategy at Tellimer, an investment bank focused on emerging markets. “Long term, Turkey remains a key ally of the U.S., particularly when the U.S. is positioned against Iran and Russia.”
Investors probably won’t react as negatively as they did to central bank Governor Murat Cetinkaya’s ouster this month unless the sanctions, for buying a Russian missile system, are unexpectedly punitive, said Malik. U.S. President Donald Trump hinted last month that the punishment could be mild.
Turkey on Friday began receiving parts for the S-400 missile system, which Washington has said puts at risk the Pentagon’s costliest weapons program, the F-35 fighter jet built by Lockheed Martin Corp. That prompted U.S. officials to decide on a package of penalties, to be announced once the president has given his approval, according to people familiar with the matter.
The lira is the world’s most volatile currency this year and has declined 7.6% against the dollar, the biggest loss among emerging-market peers after Argentina’s peso.
To contact the reporter on this story: Paul Wallace in Lagos at pwallace25@bloomberg.net
To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, James Ludden
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