ISTANBUL: Turkish Prime Minister Recep Tayyip Erdogan’s public feud with judiciary and police force over a corruption scandal shaking his government continued to weigh on markets yesterday, with the lira touching record lows.
Since mid-December Turkish assets have been battered by a wide-ranging corruption investigation which came to light with a series of dawn raids and arrests that led to the resignation of three ministers. Erdogan has rejected the accusations as an attempt by a US-based cleric to taint his AK party before March local elections that will be a test of his support.
“A weak showing by the AKP in the local elections might give grist to the mill of his opponents within the AK party — perhaps inspiring (Presideent Abdullah) Gul and those around him to offer an alternative platform to sustain the AK party’s legacy,” Timothy Ash, head of emerging market research at Standard Bank said in a note.
But ratings agency Moody’s, which raised Turkey’s sovereign credit rating to investment grade last May, said that domestic political risk was already embedded in its rating for the country.
The lira slipped slightly to 2.1880 by 0950 GMT from 2.1776 late on Wednesday having touched an all time low of 2.1980 earlier in the morning. But a Reuters poll showed on Wednesday that the lira is likely to stabilise against the dollar in coming months despite pressure on it due to capital flows out of emerging markets and political uncertainty.
Most traders expect the central bank eventually to hike interest rates to support the currency. The main Istanbul stock index was trading down 1.18 percent at 66,536.95 points.
reuters
