Turkey Markets Plunge as Traders Brace for U.S. Sanction Fallout

(Bloomberg) -- Turkey’s lira tumbled past 5 per dollar to a record low, while government bonds and stocks slumped after the U.S. imposed unprecedented sanctions on its NATO ally.

The Turkish currency fell as much as 1.5 percent to 5.0726, extending a slide of more than 25 percent this year. The yield on 10-year debt bonds jumped 82 basis points to an all-time high of 19.41 percent. The benchmark share index dropped 2.8 percent.

The U.S. Treasury Department said in a statement Wednesday it had imposed sanctions on two Turkish ministers over the continued detention of an American pastor, highlighting the disconnect between Washington and Ankara that has strained ties and rocked the nation’s markets.

“It’s bad,” said Cristian Maggio, head of emerging market strategy at TD Securities in London. “It’s a rare episode of sanctions among NATO members. It’s not a decision that is taken lightly. So I think this is not just headline risk, I think it will bear visible and measurable economic and financial consequences.”

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