Turkish lira hit by cabinet concerns

LONDON/ISTANBUL, July 10, (RTRS): The Turkish lira surrendered early gains on Tuesday as investors worried about the make-up of newly empowered President Tayyip Erdogan’s cabinet, in which his sonin-law will serve as treasury and finance minister.

The new cabinet excludes former deputy prime minister Mehmet Simsek, considered the most marketfriendly minister in the previous government.

The lira, which has lost nearly a fifth of its value against the dollar this year, stood at 4.7272 at 1105 GMT, having weakened as far as 4.75 overnight. It had closed at 4.5745 on Friday.

The appointment of Berat Albayrak, a former energy minister, to run the economy underscores worries among investors about Erdogan’s drive for greater control over monetary policy.

It “has heightened concern that the new government will not take the appropriate policy action required to address an overheating economy and structural problems,” said Derek Halpenny, European Head of Global Markets Research at MUFG.

The yield on Turkey’s benchmark 10-year bond rose to 17.84 percent from 17.35 percent at Monday’s close, while the two-year bond yield rose 46 percentage points to over 20.23 percent.

Turkey’s dollar bonds also fell and their average yields surged.

The market will be keeping a close eye on the new minister’s comments and signals regarding Turkey’s persistent double-digit inflation and wide current account deficit.