Lira extends longest losing streak

ISTANBUL — The Turkish lira fell against the dollar for a sixth day and government bonds dropped as a showdown with the US over a detained American pastor continued to weigh on investor sentiment.

The currency weakened 1.9 per cent to a record low amid its longest streak of losses in three months, while the yield on 10-year bonds touched an all-time high. The lack of liquidity in the lira market and broad dollar strength are compounding the move, according to an Istanbul-based trader who asked not to be named as they are not authorised to speak publicly.

The lira was 1.8 per cent weaker at 5.1720 against the dollar as of 12:25pm. Istanbul time after earlier touching 5.1810 per greenback. The yield on 10-year government bonds jumped as much as 64 basis point to 19.83 per cent.

While President Recep Tayyip Erdogan said on Saturday that Turkey will respond in kind to the US decision to sanction two government ministers, speculation that the dispute will eventually be resolved has increased. Erdogan said he believed that the two Nato partners will “leave behind a major chunk of differences” soon, a sign that a breakthrough in one of the worst diplomatic crises between the nations is possible.

“It’s worth noting that Erdogan has been trying to use very careful language as much as he can,” analysts at Global Securities in Istanbul, including the head of research, Sertan Kargin, wrote in a note to clients.

“It seems there is still room for a diplomatic exit, although more time and effort are needed to bridge the gap between the two countries. Should this be the case, lira assets could recover strongly and swiftly.”—