Turkish Lira Sinks to New Low as Syria Tensions Climb

The lira sank to a record against dollar today on concern Turkey will be hurt by a military action against its neighbor Syria and confusion over central bank measures to support the currency.

The lira pared as much as 1.6 percent to 2.0536, its record since at least 1981 when Bloomberg started tracking the data, and traded down 0.9 percent to 2.0536 at 10:41 a.m. in Istanbul. The currency weakened more than all other emerging market currencies in the last five days after India’s rupee, raising its loss this year against dollar to 13.1 percent.

The Turkish air force’s mission in a possible operation against Syria will be combat air patrol, Milliyet newspaper reported today, citing unidentified military sources. Turkey’s Incirlik air base near the Syrian border will be used for logistical support if NATO attacks. Some 4,000 Syrians have sought refuge in Turkey in the past five days on fears of a chemical attack, state-run TRT television said.

“Syria is definitely on everybody’s mind and Turkey is obviously the closest major emerging market to the region,” Ilan Solot, a London-based strategist at Brown Brothers Harriman & Co., said by telephone.

A military strike against Syria leaves Turkey “with added perceived risks” as this could boost the current account deficit through higher energy prices, Tim Ash, chief emerging-markets strategist at Standard Bank in London, said by e-mail.

The dollar’s 14-day relative strength indicator against the lira, calculated on a monthly basis, rose to 72.4, the highest level since Oct. 2002, according to data compiled by Bloomberg. A reading above 70 suggests to some traders a currency may be poised to weaken.

Central Bank Governor Erdem Basci ruled out increasing the overnight lending rate above 7.75 percent this year in an interview with the state-run Anatolia news agency yesterday. He vowed to introduce other measures to support the lira and forecast the currency would end the year around 1.92 against the dollar.

“Basci left the market in some kind of a suspense, saying he will start to create some new measures,” Solot said. “The market is waiting for a big announcement.”

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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