Turkish Lira Drops With Bonds, Stocks as Erdogan Blocks Twitter

The lira weakened and Turkish stocks and bonds fell following Prime Minister Recep Tayyip Erdogan’s decision to block access to Twitter nine days before local elections.

Turkey’s currency dropped as much as 0.7 percent before trading 0.1 percent weaker at 2.2312 per dollar at 6:01 p.m. in Istanbul. Yields on two-year notes rose seven basis points to 11.48 percent in their third day of increases. The Borsa Istanbul 100 Index dropped 1 percent.

Twitter access was blocked after Erdogan said the microblogging service ignored court orders to remove content related to a government corruption scandal. Erdogan said yesterday he’d “dig up Twitter and so on -- all of them -- from the roots” at a party rally. Last week he also said Turkey might block access to Facebook and Google Inc. (GOOG)’s YouTube.

“The concern is that political noise will increase before the elections” to be held on March 30, Erkin Isik, a strategist at Turk Ekonomi Bankasi AS, said in e-mailed comments today.

Political tensions have been elevated since the graft probe targeting Erdogan’s government became public on Dec. 17. Protests broke out after the release of audio tapes, purportedly of Erdogan discussing hiding large amounts of money with his son, last month. Erdogan has said the tape, one of dozens released via anonymous accounts on Twitter, was a montage.

‘Heavy-Handed’

“The AKP’s actions in the last few months have been increasingly heavy-handed,” Manik Narain, a currency strategist at UBS AG in London, said by e-mail today. He forecasts the lira to fall to 2.3 per dollar within a month.

The lira weakened 0.9 percent on March 19 after Federal Reserve Chair Janet Yellen said interest rates could rise in about six months after asset purchases end. Data last week showed Chinese industrial production and retail sales expanded slower than predicted.

“The external environment remains very fickle,” Narain said. “While investors are waiting to see what March 30 brings, structural concerns about Chinese leverage offsetting stimulus there and rising U.S. rates are not a great environment for the lira.”

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

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Matthew Brown, Tal Barak Harif

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