Turkish lira, market steady despite Russia tensions

by Andrew Jay Rosenbaum

ANKARA

The Turkish lira, and the Turkish stock market have held relatively steady despite pressure on emerging-market assets after a Russian jet was downed by Turkish forces on Tuesday when it violated Turkish air space.

The Turkish lira has fallen to about 2.93 against the dollar from about 2.84 before the incident. The lira has decline from about 2.81

“The Turkish lira-dollar relationship was already moving in favor of the dollar last week, regaining lost ground and returning to pre-Turkish election levels,” commented Alessandro Bruno, an analyst with Ontario, Canada-based Profit Confidential, in an note published on Nov. 25.

Bruno cited anticipation of the Federal Reserve’s likely interest rate hike in December as well as recent positive economic data from the U.S. as the moving forces behind that drop.

“The dollar remains very strong,” Bruno said.

The lira was also pressured on Wednesday when the new Turkish government announced its program, and the wording regarding the central bank spurred rumors of change to that institution’s independent status.

Deputy Prime Minister Mehmet Simsek sent out a tweet on Thursday stressing that there would be no pressure on the central bank’s independence, an announcement that was well-received by the financial community.

“It’s actually encouraging that Simsek seems to be going on record, and early to fight for CBRT independence,” wrote London-based Nomura credit strategist Timothy Ash.

Over the long-term, analysts said that the Turkish lira is supported by good fundamentals.

“Growth in Turkey is being driven by solid consumer demand,” said Christopher Dembik, an economist with Saxo Banque in Paris, told Anadolu Agency on Friday. “Exports are also expected to pick up in the near future.”

The Turkish stock exchange has also not experienced sharp volatility since the incident took place.

The Turkish BIST-100 index was slightly lower at the open on Friday, after dropping 2.39 percent to close at 74,997.64 on Thursday.

The index fell from 79873.96 at the open on Tuesday to close at 76.478.35 after the incident. On Wednesday, the index closed higher at 76843.27.

But the Turkish index has performed better than the benchmark MSCI Emerging Markets Index which has dropped about 6.6 percent since Monday.