Erdogan’s speech gives momentum to Turkish lira

As Turkey’s President Recep Tayyip Erdogan calls for rapid formation of new government, Turkish lira outperforms other emerging market currencies

Photo by: AA
Photo by: AA

Updated Jul 28, 2015

In his initial public appearance after the general election in Turkey, President Recep Tayyip Erdogan’s comments boosted the Turkish lira, while stocks closed the day higher. President Erdogan said all parties must put aside their egos to form a new government. Stating that his role as the first elected president has a crucial importance, he said he would fulfill the duties given to him by the constitution.

After the current account deficit figures were released in the morning, the lira fell slightly against the dollar and the euro, however president’s messages for calling to end the political uncertainty gave optimism to the local markets. After starting the day at 2,74 against the dollar, the lira fell to as low as 2,70.

Due to strong US retail sales data, the dollar rallied against 16 major currencies, with the expectation that the economy is on track for the US Federal Reserve to hike interest rates later this year. The lira, however, became the only currency to firm against the dollar and outperformed other emerging country currencies.

Meanwhile, Turkey’s main stock exchange BIST 100 extended its gains and closed the day 1,38 percent up from 80,845 points, coming nearer to its 81,943 points level just before the election. Bond yields also reacted positively to Erdogan’s call and 10-year bond fell to 9.38 percent.  

According to analysts, the markets are pricing in that the election process will be overcome with less damage than expected. However, until forming the new government, they say the risks for the markets are still there.        

TRTWorld and agencies