Lira Trims Gain as Turkey Mulls Placing S-400s on Southern Coast
Lira Jumps on Signs Erdogan Working to Avert Missile Deadlock
(Bloomberg) -- The lira trimmed gains on speculation Turkey may deploy a Russian missile-defense system along its southern coast, a move that could anger the U.S. and drag it into renewed economic turmoil.
The currency was trading 1.4% stronger against the dollar as of 4:45 p.m. in Istanbul, after surging more than 2% earlier in the day on speculation that Turkish President Recep Tayyip Erdogan was working to break the impasse over the planned purchase of the S-400 battery. The U.S. has threatened to impose sanctions on Turkey if the deal is completed.
According to four people with knowledge of the deliberations who spoke on condition of anonymity because the issue is sensitive, Turkey is considering stationing the long-range missiles near where its warships accompany vessels exploring for energy in the Mediterranean.
“All we know is that the issue of S-400s is a dealbreaker for the U.S.,” said Timothy Ash, a strategist at Blue Bay Asset Management in London. “If Turkey gets S-400s it can deploy them wherever they like.”
The prospect of fresh tension between the NATO allies has underpinned investor bearishness toward the nation’s assets this year. Last summer, the U.S. sanctioned two Turkish government officials, contributing to a currency crash. Markets are also pressured by political uncertainty after Turkey ruled to re-run municipal election in Istanbul. Erdogan’s ruling party lost the original vote in March.
Scientist Released
On Wednesday night, Turkey released Serkan Golge, a U.S. citizen and former NASA scientist convicted for ties to the 2016 coup attempt. The move was seen as a sign Ankara is prepared to take a more conciliatory approach in its relations with Washington. The lira’s gains quickened earlier on Thursday as foreign investors closed out their short positions, according to two people with direct knowledge of the matter. Stocks jumped 3.2%, the most since early April on a closing basis.
President Donald Trump and Erdogan spoke by phone last night. According to Erdogan’s communications director, the two leaders will meet at the G20 summit in Japan in June.
To contact the reporter on this story: Constantine Courcoulas in Istanbul at ccourcoulas1@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, ;Dana El Baltaji at delbaltaji@bloomberg.net, Alex Nicholson, Robert Brand
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