The lira weakened for a second day against the dollar and bond yields climbed the most in eight weeks on concern rising tensions between Iran and Israel will further lift oil prices, hurting the global economy.
The Turkish currency depreciated as much as 0.5 percent before paring its loss to 0.1 percent at 1.7686 as of 5:14 p.m. in Istanbul, heading for the lowest level in two weeks. Yields on two-year benchmark debt rose for a third day, up 16 basis points, or 0.16 percentage point, to 9.34 percent, the highest since Jan. 2.
“The only reason is regional political risks, especially Israel-Iran tensions and the resultant high oil prices” driving the lira and bonds lower, Yarkin Cebeci, an economist at JPMorgan Chase Bank in Istanbul, said in e-mailed comments.
The lira retreated after Iran stopped sales to French and British buyers to preempt a European Union embargo. Turkey depends on imports for almost all of its energy requirements, paying $54 billion last year, 22 percent of its total import bill, the Ankara-based statistics office shows. Middle Eastern countries bought one-fifth of total Turkish exports in 2011, according to the statistics office website.
Oil advanced 11 percent this year on concern that escalating tensions in the Middle East will disrupt supply as the EU agreed Jan. 23 to ban crude imports from Iran. Iran has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil, in response to an embargo.
The Turkish currency lost 18 percent in the biggest decline worldwide and yields soared 390 basis points last year as investors sold lira assets on concern a record high current-account deficit will hurt the nation’s financial stability.