Turkish lira hits historic lows after Kurdish party crackdown

Turkish lira hits historic lows after Kurdish party crackdown
Turkey's detention of Kurdish-party MPs rattled the nation's currency on Friday, plunging the lira to new historic lows.
2 min read
04 November, 2016
The Turkish lira hit new historic lows after the arrest of Kudish MPs [Getty]

Turkey's embattled lira plunged to new historic lows in value against the US dollar on Friday, as markets took fright at a new crackdown against its main pro-Kurdish political party.

The lira is now trading at values substantially lower than in the wake of the July 15 coup that aimed to unseat President Recep Tayyip Erdogan and rattled the nation's markets.

Despite this, Erdogan maintained Turkey had "pulled through the crisis period with record growth rates," during a speech at the Capital Market Congress.

"Turkish economy’s performance is better than the world average and much better than Europe. Our country's infrastructure investments and its commitment to major projects are strong enough to attract the attention of the entire world," he said.

Friday's detention of a dozen MPs from the pro-Kurdish Peoples' Democratic Party (HDP) put immediate pressure on the currency, while the imprisonment of its co-leaders Selhattin Demirtas and Figen Yuksekdag extended losses.

The lira was trading at 3.17 to the dollar, a new historic low and a loss in value of 1.8 percent on the day. Its lowest value in the wake of the coup was 3.09 lira to the dollar.

The Turkish stock market also tumbled, with the Borsa Istanbul 100 Index shedding 3.15 percent to 74,267 points.

The lira has been under sustained pressure over the last few weeks amid doubts over Turkey's flagging growth prospects and fears the drive by Erdogan for a presidential system will risk more instability.

Analysts said that the move to detain a dozen MPs from the HDP, including the two co-leaders, had added to fears about political turbulence.

"The currency and other Turkish lira denominated assets are likely to remain pressurised due to heightened tension," said Gokce Celik, chief economist at QNB Finansbank Research in a note to clients.

Ozgur Altug, chief economist at BGC Partners in Istanbul, said the lira had been depreciating in the last months "pretty much without any break" and the next technical ceiling for the currency was at 3.2 lira to the dollar.

"Psychologically, we are in uncharted territory right now. Therefore, it is hard to guess where and when the bleeding in the Turkish lira will stop," he said.