Turkey lira CRISIS: New election could spark CHAOS for currency – market strategist

Turkey lira CRISIS: New election could spark CHAOS for currency – market strategist

The Turkish leader has appealed for the Istanbul election to be re-run after his AK Party were defeated by a narrow margin to the main opposition Republican People’s Party (CHP). Recounts ended today and the CHP candidate Ekrem Imamoglu said he expected to be installed as mayor despite protest from President Erdogan. The loss of Istanbul is a huge one for President Erdogan, who launched his political career in Istanbul as mayor in the 1990s. His AK Party held power in Turkey’s commercial hub for 25 years up until the latest election.

The struggling lira has remained under pressure from the political fallout and plunged to a six-month low against the US dollar this week, sinking to as weak as 5.82 in a level not seen since October.

The Turkish currency had managed to claw back ground this morning and was trading at 5.71 at 2.32pm UK time.

But currency analysts claim the worst could be yet to come for the lira if political unrest continues.

Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, told CNBC: “The market will not like months of uncertainty, if indeed the vote is repeated.

“At this stage, whatever the result of the re-vote, the impression has been left that the election process in Turkey is not secure.”

He continued: “From the market perspective, an extended period of uncertainty around elections is a bad idea.

“It would suggest more election-related policy easing which is bad for the rebalancing story.”

After 16 days of appeals and recounts, the AKP on Tuesday asked the High Election Board (YSK) to annul and re-run the election in Istanbul over what it said were irregularities.

Its nationalist MHP allies made a similar request on Wednesday.

The AKP also urged officials to block CHP candidate Ekrem Imamoglu from receiving his mandate until a ruling on their appeal was made.

However, Imamoglu said he will begin working as mayor even if he is not granted an official mandate from the YSK.

The AKP was trying to pressure officials into making decisions, he said.

He told reporters in Istanbul: ”As soon as the records are finalised, we will have received our duty, that is the law.”

The Turkish lira has also been squeezed by ongoing tensions with the United States over Turkey’s planned purchase of a Russian air defence missile system.

The plan to buy the system had fuelled tensions between the NATO allies, and the United States said Turkey could face sanctions over the issue.

This week saw Turkish Finance Minister Berat Albayrak hold talks with US President Donald Trump over the controversial purchase, with President Trump said to have taken a “reasonable” stance.

Published at Wed, 17 Apr 2019 13:28:00 +0000