Turkish Lira falls after President Erdogan’s AK Party suffers major losses
The Turkish Lira declined sharply on Monday morning, after President Erdogan’s political party suffered defeats in the country’s capital of Ankara and the commercial hub of Istanbul.
The Turkish Lira fell on Monday morning after news broke that President Recep Tayyip Erdogan’s Justice and Development Party (AK Party) suffered major losses in municipal elections held over the weekend.
The AK Party lost control of keys districts including the Turkish capital of Ankara and the commercial hub of Istanbul, with the election results a reflection of electorates discontentment with Erdogan’s leadership.
Turkish Lira slides as Erdogan’s support wains
In reaction to Erdogan’s party suffering pivotal losses, the Turkish Lira fell sharply on Monday morning, trading at $5.6913, weakening against the dollar with it sitting at $5.55 levels at Friday’s close.
The election result also saw Turkey’s overnight swap rate rocket upwards by as much as 1200%, with the central bank doing its best to shore up the currency.
BIST 100 slides as investors fear increase in populist policies
Turkey’s BIST 100 stock index also fell by 1.65% on Monday morning, as European markets reacted to the election results.
The slide in the index is reflection of investors fear that the electoral losses Erdogan and his party have suffered will result in the leader embracing further populist policies to win back the electorate.
Populism in the country has increased considerably in the country already and was the primary driver of the Lira tanking last year, with the president opting to hold interest rates down despite rising inflation in a move that made investors skittish.
"The market will now want to see what reforms the AKP is going to roll out, after the new promises made by Erdogan," Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, commented in an email note Monday.
‘The actual election results don't change that much, Turkey still faces huge economic challenges based around a loss of confidence in policy making,’ he added.
‘First and foremost, confidence in economic policy making has to be rebuilt to stop the trend of rising dollarization... AKP government [is] over 50 percent nationally, promising reform, and they now have to deliver otherwise markets will punish Turkey brutally. That is the lesson from recent months.’
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