Turkish Lira Falls After Erdogan Threatens to Close NATO Bases
Turkish Lira Falls After Erdogan Threatens to Close NATO Bases
(Bloomberg) --
The Turkish lira slid to its weakest level in almost two months on speculation Turkey was headed for a fresh spat with the U.S.
The currency depreciated 0.7% to 5.85 per dollar by 5:25 p.m. in Istanbul after President Recep Tayyip Erdogan threatened to close two critical NATO bases. He said on Sunday that would be an option if Washington sanctioned Ankara for buying a Russian missile-defense system.
The two have been at odds over Turkey’s purchase of the S-400 system earlier this year. NATO says it is incompatible with Ankara’s membership of the bloc, and the U.S. Senate Foreign Relations Committee has voted to impose sanctions that could plunge Turkey into renewed economic turmoil.
With inflation accelerating, Turkey’s real yields may not provide much of a buffer if appetite for the nation’s assets sours. The lira has already weakened more than any other emerging-market currency since Dec. 12, when the central bank cut rates a for a fourth straight meeting to 12%, bringing the total reduction since early July to 1,200 basis points.
The currency could fall another 1.5% toward an October-low of 5.938 if there’s “a relatively harsh response from U.S. officials to remarks from President Erdogan,” said Piotr Matys, a London-based strategist at Rabobank.
Government bonds also fell, with the yield on 10-year local-currency notes jumping 16 basis points to 12.52%. The benchmark stock gauge advanced for a third day, led by Akbank TAS -- one of the country’s largest listed lenders -- as risk appetite across global markets remained buoyant.
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, ;Alex Nicholson at anicholson6@bloomberg.net, Paul Wallace, Justin Carrigan
©2019 Bloomberg L.P.