Turkish Lira Leads Global Losses on Downgrades, Sanction Concern

(Bloomberg) -- The Turkish lira led global currency losses after dual credit-rating downgrades underscored concern the Middle East’s largest economy could be hobbled amid prospects of escalating U.S. sanctions.

The lira sank 2 percent to 6.1401 per dollar at 1:12 p.m. in New York amid very thin trading due to a weeklong local holiday. S&P Global Ratings and Moody’s Investors Service cut Turkey’s rating on Friday, saying the volatile currency and wide current-account deficit may undermine the economy. Qatar, meantime, agreed Monday to provide a credit line to backstop Turkey’s financial system.

"Investors have latched onto weak fundamentals, and weakness could persist," said Wei Li, BlackRock Inc.’s head of iShares EMEA strategy in London.

The currency tumbled over the past month as the Trump administration sanctioned members of President Recep Tayyip Erdogan’s government amid an escalating dispute over a detained U.S. pastor. Erdogan portrays the turmoil as an economic war waged by Washington and has resisted pressure to raise interest rates to protect the currency, a step that could curb economic growth. S&P forecasts a recession next year.

--With assistance from Constantine Courcoulas.

To contact the reporter on this story: Alexandra Stratton in New York at astratton4@bloomberg.net

To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, Alec D.B. McCabe

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