The Turkish lira, shares, and bonds all weakened on Thursday as investors fretted over rising tensions in Syria’s Idlib region, where Ankara is edging closer to military confrontation.
The lira <TRYTOM=D3> stood at 6.0981 against the dollar at 1425 GMT, compared with a close of 6.0845 on Wednesday. It is currently at its weakest levels in regular trade since last May.
The currency – which remains somewhat fragile after a crisis in 2018 briefly halved its value – has fallen in seven of the last ten trading days.
In the last few weeks, Turkey has funneled troops and equipment to Idlib and threatened to halt advances by Russia-backed Syrian government forces.
At the same time, threatened U.S. sanctions still loom over Ankara’s acquisition last year of Russian S-400 missile defenses.
The uncertainty hit the main BIST 100 share index <.XU100>, which fell more than 3%. The banking index <.XBANK> was down 4.83%.
The yield on the benchmark 10-year bond <TR10YT=RR> rose to 12.03% from 11.57% on Wednesday. It had recently fallen below 10% from a level of 21% last May.
A strong U.S. dollar, as well as geopolitical tensions, are behind the move, an FX trader in a bank said.
“The economic impact of the coronavirus outbreak and pressure over the Japanese Yen, a safe-haven currency, due to proximity to the virus brings more pressure on the lira,” the trader said.
In a “flash crash” in Asian trade on Aug. 26 last year, the lira briefly hit a level of 6.47 when liquidity was very low.
Turkey’s dollar bonds also fell on Thursday, with the sell-off heaviest in the longer-dated issues.
The April 2043 issue <US900123CB40=TE> shed 1.8 cents to trade at 84.2 cents in the dollar, while the January 2041 issue <US900123BJ84=TE> lost 1.5 cents to 95.4 cents in the dollar, Tradeweb data showed.