Turkish Lira strengthens after key referendum

ISTANBUL

The Turkish Lira strengthened early on April 17 after Turkey approved the presidential system in a tight referendum, with investors hoping the outcome would bring much-needed stability.

Some 51.3 percent of the more than 58 million Turkish voters said “Yes” to the ruling Justice and Development Party’s (AKP) constitutional amendment package in a tight race to decide on whether to shift to an executive presidential system. The gap between the two votes stood at around 1.3 million, according to midnight figures by the state-run Anadolu Agency. 

The lira firmed to below 3.64 against the U.S. dollar early on April 17, more than 2 percent stronger than a close of 3.7220 last week but off a strongest level of 3.62 overnight. In the mid-day, the lira regressed to over 3.65. 

Since the start of this year, the lira has lost four percent of its value against the greenback amid domestic and global developments, making it the worst-performing emerging market currency in 2017.

The Istanbul Stock Exchange also rallied after the result, up by 0.74 percent immediately after market opened. 

Many investors had been betting on a “Yes” vote as the best way to restore economic and political stability. The rally in the lira and the markets will likely be in the short-term, according to analysts, as other developments will be closely followed. 

“The market is likely to cheer the continuation of stability, declining chances of an early election and the tight call on the referendum that may contain any market-unfriendly moves,” said Özgür Altuğ, chief economist at Istanbul-based BGC Partners, as quoted by AFP on April 17. 

But Altuğ said that despite the welcome from the market in the near term, “we do not expect a major breakout.” 

Many market players have been eyeing whether there will be an early election in the country, which experienced a long cycle of elections in the past years. 

Deputy Prime Minister Mehmet Şimşek, however, told Reuters in an interview on April 17 that President Recep Tayyip Erdoğan has made it very clear that there are no plans to dissolve parliament and call for early elections before the 2019 polls.