Turkish markets wane as Ankara nears conflict in Syria

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.


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