ISTANBUL: Türkiye's lira fell as much as 12.7% and touched a new all-time low of 42 to the dollar on Wednesday, with bonds and stocks also tumbling sharply, after authorities detained President Tayyip Erdogan's main political rival.
The move against Ekrem Imamoglu, the mayor of Istanbul, was called "a coup attempt" by the opposition and appears to cap an aggressive months-long legal crackdown on opposition figures across the country which has been condemned as a politicised attempt to silence dissent.
Imamoglu was expected to be named as the main opposition's presidential candidate within days.
The lira traded at 38.90 to the dollar at 1016 GMT, from a close of 36.67 on Tuesday, having recouped some of the losses from the all-time low it hit earlier - but still having had its biggest decline since July 2023. The earlier tumble to 42 marked one of the lira's largest absolute intraday moves on record.
Türkiye's international government bonds also came under pressure with longer-dated maturities suffering the sharpest falls. The 2045 maturity fell 1.6 cents to be bid at 85.117 cents, its lowest level since
"In Türkiye this morning, bonds and FX are coming under pressure after a potential presidential candidate, the mayor of Istanbul, was arrested," said Frantisek Taborsky, EMEA FX & fixed income strategist at ING.
"(Türkiye's lira) is the most heavily positioned carry-trade in the emerging markets space at the moment in our view, and a sharp move could potentially lead to further outflows. On the other hand, we should see local banks providing some FX support."
Finance Minister Mehmet Simsek said they were doing everything necessary to ensure healthy functioning of the markets, without giving further details.
Bankers calculate that the Turkish central bank sold a minimum of $5 billion in FX after lira's crash, while some say it may have already reached $10 billion for the day.
Analysts and investors were also concerned about the knock on effect for monetary policy, worrying that the sharp decline in the lira could delay or halt the rate-cutting cycle since the central bank has been ensuring real appreciation of the currency for months. — Reuters
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