The lira rose and Turkish stocks jumped the most in more than three months on bets tensions between the government and the judiciary are easing and as the central bank sold $600 million for lira.
The currency appreciated 1.4 percent to 2.1240 per dollar, trimming its loss since a corruption investigation rattled markets Dec. 17 to 5 percent. The Borsa Istanbul 100 Index climbed 6.4 percent, the most since Sept. 19, to 67,985.70 at the close of trading. Yields on two-year notes were unchanged at 10.17 percent, equaling the highest close in almost two years.
While Prime Minister Recep Tayyip Erdogan this weekend railed against a “gang” within the police and judiciary who he accused of treason, no new arrests have been made in the corruption probe targeting his government since Dec. 18. The graft inquiry, which led to the arrest of three ministers’ sons and the head of the largest listed state-owned bank, forced him to replace 10 ministers before local elections March 30.
“Investors are betting on a calmer period in the political scene,” Emre Balkeser, head of sales and trading at Garanti Yatirim Menkul Kiymetler AS in Istanbul, said in e-mailed comments today. “With the markets widely exposed to political developments, having no news is regarded as good news.”
The allegations of graft in government tenders, bribery and money laundering have helped weaken the Turkish currency more than 16 percent against the dollar this year, and to a record-low 2.1764 Dec. 27. Two-year yields are more than four percentage points higher, while the benchmark stock index slumped 13 percent in the period.
Sons of two former ministers and Suleyman Aslan, chief executive officer of state-run lender Turkiye Halk Bankasi AS, remain in jail. The government responded to the arrests by removing hundreds of police chiefs, since when the force has refused to comply with requests to make further arrests, according to a Dec. 26 statement from Istanbul prosecutor Muammer Akkas.
Newly appointed Interior Minister Efkan Ala has “documents” showing sales of lira for dollars before the investigation Dec. 17, he said in an interview with state-run TRT television yesterday. An “organized gang” within the state is attempting to carry out a coup against the government, he said.
The lira is the fourth-worst performer against the dollar among 24 emerging-market currencies tracked by Bloomberg this year. The benchmark stock index plunged 27 percent in dollar terms, the second-biggest decline among 94 indexes, data compiled by Bloomberg show.
“Banks were the hardest hit in the recent selloff,” Julian Rimmer, a trader at London-based CF Global Trading U.K. Ltd., said by e-mail. They “offer the highest beta to any recovery in sentiment,” he said.
Turkiye Garanti Bankasi AS, which rose 7.4 percent, and Akbank TAS, which gained 6.9 percent, were the top advancers by index points today.
Turkey’s central bank sold $600 million today for lira, the most since July 10. It plans to sell at least $3 billion in daily auctions next month, it said Dec. 24.
The lira may strengthen to about 2.10-2.12 per dollar tomorrow “if we don’t see adverse political developments,” Garanti’s Balkeser said. “The stock index may close the year at between 64,000 and 67,000 points.”