Lira Climbs to Highest Since Before Election on Coalition Bets

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Turkey’s lira strengthened the most among emerging-market currencies as investors speculated political leaders will agree to form a coalition government.

The lira appreciated 0.9 percent to 2.6533 per dollar at 5:50 p.m. in Istanbul, its highest level since before the June 7 election. The currency plunged the most since 2010 to a record low the day after the vote, in which the ruling AK Party failed to win a majority for the first time in 13 years.

Turkey’s President Recep Tayyip Erdogan urged political party leaders late on Wednesday to form a coalition government as soon as possible. The lira has recovered all its losses since this month’s ballot amid optimism the country will avert fresh elections, while mixed U.S. economic data eased concern the Federal Reserve will raise interest rates anytime soon, supporting demand for emerging-market assets.

“The markets seem to be giving more weight to the idea a coalition will be formed,” Erkin Isik, an Istanbul-based strategist at Turk Ekonomi Bankasi AS, said by e-mail. “The lira has underperformed other currencies since March, so the market is more inclined to react positively.”

The currency weakened 12 percent against the dollar this year, the most among 24 emerging-market currencies after Brazil’s real, according to data compiled by Bloomberg.

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