Turkish lira hits the skids on domestic tensions and Ukraine fears

ISTANBUL

REUTERS Photo

Turkish markets fell into a decline over rising tension in domestic politics and geopolitical risks stirred by the ongoing crisis in Ukraine.

Turkey saw its currency, the Turkish Lira, slipping to three-week lows at over 2.50 against the dollar last night and started off the day at around 2.40, after slightly recovering.

The stock market was also on a downward note in morning trading, having fallen to around 0.5 percent to 61,250 points at 10.30 a.m.

Timothy Ash, head of emerging markets research at Standard Bank, said the weakening of the lira was mostly the result of domestic political developments.

“The signs indicating that the political tension will rise until the elections in March are strong,” he said, noting that markets are closely watching the Justice and Development Party’s (AKP) vote projection.

In addition to turmoil in Turkish politics prompted by leaked recordings alleged to demonstrate massive corruption on the part of Prime Minister Recep Tayyip Erdoğan, the tense backdrop in international politics added to the headaches.

Investors pulled funds out of risk assets on fears of a wider conflagration in Ukraine, sending the Russian ruble to a five-year low against the dollar and all time-lows against the euro.

Russian President Vladimir Putin ordered drills by his Armed Forces to test combat readiness in western Russia, near the border with Ukraine, prompting Washington to warn that a military intervention would be a “grave mistake.”

Investors are also looking to comments from Fed chief Janet Yellen’s testimony at a U.S. Senate committee today on her views on a recent run of soft U.S. data, which investors chalk up to bad weather, rather than any weakening in fundamentals.