Turkey’s lira reached a record low versus the dollar on Wednesday, affected by investor concern about possible US sanctions, tense relations with the European Union and the ongoing Caucasus conflict.
It should be noted that the currency has lost 24 percent of its value this year since concerns about the central bank’s exhausted forex reserves, costly interventions in the currency market, and geopolitical matters.
The lira recorded a record low of 7.8850 versus the US currency, decreasing from a close of 7.8050 on Wednesday; by 1232 GMT it stood at 7.8800.
Worries about possible U.S. sanctions are back after Bloomberg declared on Tuesday that Ankara would start testing the Russian S-400 missile defense system.
Meantime, tensions with the EU seemed to increase after President Recep Tayyip Erdogan reported on Tuesday that decisions at an EU summit last week about conflicts including maritime claims in the eastern Mediterranean had been insufficient to resolve disagreements.
Furthermore, Erdogan and a Turkish Cypriot leader also declared the partial reopening of a Cypriot resort left since the 1974 attack by Turkey. This induced condemnation from Greece and the Greek Cypriot government.
A banker related: The EU-related concerns over geopolitical tensions decreased in recent days due to a move towards dialogue. But as of this week, an increase in tensions in both Azerbaijan and the EU can be observed.
Struggling between Azerbaijan and Armenian forces in Nagorno-Karabakh has increased for 25 years. The support of Ankara for Baku has led Turkey to be apart from other big nations, which alerting NATO allies who try to make a ceasefire. Investors were also evaluating the Treasury’s first Eurobond issue since February. Although the tensions and financial market disturbance, Turkey sold a $2.5 billion 5-year Eurobond on Tuesday that gave purchasers 6.4 percent interest.
The Treasury declared that demand was three times the amount it borrowed, and it said that Turkey has borrowed $6.5 billion from international markets this year, out of a scheduled $9 billion.
Tradeweb data revealed that Turkey’s dollar-denominated bonds declined, with the April 2043 and February 2045 issues both losing more than 1 cent on the dollar, which is the biggest daily fall in two weeks.
According to IHS Markit, Five-year Turkey credit default exchanges increased to 511 basis points, with a raise of 9 basis points from Tuesday’s close.