Lira weakens in political unease before elections

The lira weakened on Monday in line with global dollar strength, and amid investor concern that the June 7 general election will produce political instability and possibly a coalition government.
Hopes for the lira were also undermined by the state seizure of Islamic lender Bank Asya on Friday and data on Monday that showed exports slid 19 percent in May.
The lira fell 0.73 percent against the greenback at 2.6836 at 11:51 a.m. (0851 GMT), bringing losses this year to 13 percent, one of the weakest performances among major emerging market currencies.
andquotUncertainty over the general election outcome may lead to negative sentiment toward Turkish assets continuing this week,andquot said Erkin Iiik, a strategist at TEB-BNP Paribas, predicting a weakening trend for the lira toward its April lows.
The lira outperformed in mid-May on expectations of the election producing a one-party Justice and Development Party (AK Party) government, but without the super majority needed for President Recep Tayyip Erdogan to boost his powers.
However, it has since edged back toward the record low of 2.7435 per dollar hit on April 24. Analysts also weighed up the 19 percent slide in May exports, which reflected euro depreciation against the dollar, protests in the auto industry and bad weather.
andquotovernment officials were expecting exports to start recovering in April or May, but it appears that the recovery could take a little bit longer than desired,andquot said BGC Partners chief economist andOzgandur Altui.
Markets were concerned after Turkish authorities took over Bank Asya on Friday, with the Islamic lender caught up in a feud between Erdogan and US-based Muslim cleric Fethullah Gandulen.
The main share index fell 1.17 percent to 82,011.29 points. Bank Asya shares are not regularly traded, having been moved to the watch list market last September, where companies are kept under surveillance.
The benchmark 10-year Bond Yield rose to 9.28 percent from 9.19 percent on Friday.
Despite the downturn in exports, separate data showed a slight improvement in Turkish business conditions, with HSBCand’s Purchasing Managers Index breaking above the andquotno changeandquot mark for the first time since December.
That represented a andquotlimmer of hopeandquot for the Turkish economy, William Jackson of Capital Economics said in a note to clients. However, he said signs of rising price pressures were andquotworryingandquot and signaled that inflation was more likely to rise over the next 18 months.

SOURCE: Today’s Zaman