Lira Goes Down Amidst Demonstrations

Lira, the major currency of Turkey went down amidst the anti-government demonstrations in Turkey. This is the 6th day of demonstrations and the Turkish bonds experienced surge because of the same. On yesterday, the 2-year bonds rallied to a record figure as the markets swung to negative. The protestors in the demonstrations are accusing Recep Tayyip Erdogan, the Prime Minister of Turkey of autocratic Governance and citing grievances. The demonstrators even clashed with the police and to which, police responded with water cannons and tear gas.

However, a statement was released by the administration of Erdogan to ease the concern among the investors on yesterday. According to the Private Banking Strategist of ING Bank, Pinar Uslu, the protests against the Turkish Government is yet to come to an end and therefore the investors are still cautious.

Lira declined by 0.4% against USD and the same is currently at 1.8846 per USD. On the other hand, the yields on the 2-year benchmark bonds increased by 29 basis points and the same are at 6.32%. Only yesterday, the same experienced a decline of 75 basis points, which is the biggest in terms of percentage since 2005.

The Central Bank of Turkey relaxed their monetary tightening on today as they provided around 1 billion Liras in the 1-week repo auctions which are held on daily basis. The same amount was offered by them even a week ago. In the last 3 days, the bank has tightened the lending to other banks as well.

The MSCI Emerging Markets Index experienced a decline of 0.5% on today as the investors are speculating that the improving US economy will be encouraging the Federal Reserve to taper the financial stimulus measurements. Incidentally, the Borsa Istanbul National 100 Index declined by 1.4% and the same is currently at 79,636.79. BofA cut the rating of Akbank to underperform from neutral and hence, the shares of the same experienced a decline of 1.6%. Turkiye Is Bankasi went down by 2.8% as BofA cut down their rating of buy to neutral.

According to the fixed income strategist of Turk Ekonomi Bankasi AS, Erkin Isik, current events in Turkey kind of overlapped with heightened selling pressure in abroad and therefore very sharp improvements are visible, whereas the liquidity is low. Two major labor groups of Turkey – Disk and Kesk, incidentally have joined the protestors as well.