Turkey’s currency fell as much as two percent against the greenback over the government’s failure to accept recent local government election results.
The lira had initially strengthened to 5.72 to the dollar following the confirmation by the country’s top election authority that the opposition People’s Republican Party’s (CHP) candidate as mayor of Turkey’s largest city Istanbul.
However, the objection by the ruling Justice and Development Party of President Recep Tayyip Erdogan to the results together with negative perceptions over the way the country’s central bank is managing foreign currency reserves put pressure on the lira, sending it down to 5.85 against the dollar.
Apart from the YSK of CHP candidate Ekrem Imamoglu as Istanbul mayor, Turkish authorities have also partially settled their dispute with US officials over Ankara’s planned purchase of the Russian S-400 missile defense system.
Turkish bankers who spoke to the Reuters news agency commented that the election uncertainty and AKP’s resistance to CHP’s election victory in Istanbul, have continued to have a negative effect on the lira despite other positive factors.
New crisis looming?
Analysts are also unhappy that the Turkish lira might face a new crisis as the central bank (CBRT) had bolstered its foreign reserves with short-term lending, according to a report by the Financial Times in London.
According to Thursday’s data, as of April 12, CBRT’s net international reserves stood at 162.4 billion lira ($28.44 billion), up from 157.3 billion lira a week earlier.
The main Istanbul stock index fell 1.19 percent, with the bank’s index down 2.29 percent. The yield on the benchmark 10-year bond rose to 17.22 percent from 17.12 on Wednesday, Reuters reported.
Turkish economist comments over tension between US and Ankara, global trade wars, expected interest rate cuts from the central bank, foreign exchange buying in the Turkish market, low growth rate, high unemployment, and inflation rates are other factors putting pressure on the lira.