Turkey’s lira sinks to record low
Turkey’s lira has sunk to a fresh record low against the dollar, extending its losses as political uncertainties and a mounting Kurdish insurgency compound concerns over a broader economic slowdown in emerging markets led by China.
The lira declined by more than 0.6% to 3.0686 a dollar shortly after markets opened in Istanbul, breaching a previous low of 3.0653 per greenback last Thursday.
With less than two months to early elections, Turkey has been gripped by an escalating cycle of violence in the southeast as a two-year truce with the Kurdistan Workers’ Party, or PKK, collapsed in late July.
The resurgent conflict has already killed hundreds of security officials, civilians and Kurdish militants, prompting emergency measures and curfews in Turkey’s volatile regions on its southern borders with Iraq and Syria.
Meanwhile, the Turkish currency has been hard hit by the fallout from China’s economic slowdown, which has been roiling global markets–and particularly emerging economies.
Taken together, the developments are pressuring Turkey’s investment-grade credit status, with analysts warning that Fitch Ratings may revise its outlook to negative from stable on Friday. Fitch rates Turkey BBB-, or one notch above junk, the Wall Street Journal reported.
Investors were watching both Turkey and South Africa after Standard & Poor’s downgraded Brazil’s sovereign debt rating to junk last week. Fitch will review its rating on Turkey on Friday, Reuters reported.
South Africa’s Reserve Bank will release its second-quarter economic bulletin later, with a 2.35 billion-rand government bond auction to follow. The rand was flat at 13.5713 to the dollar.
Nigerian markets also remained in focus as inflation edged up to 9.3 percent in August, above the upper limit of the central bank’s target.
Africa’s biggest oil producer has been hit hard by the slump in oil prices, and last week JP Morgan said it would drop Nigeria from its benchmark emerging market bonds index, prompting a sell-off in both stocks and bonds.