Turkish Political Turmoil Prompts Banks to Turn Bearish on Lira

Turkey’s latest political turmoil has heightened risks for the lira and local bonds at a time when demand for riskier assets is already fading, analysts say.

The prospect of early elections has risen after Prime Minister Ahmet Davutoglu stepped down following a power struggle with President Recep Tayyip Erdogan, who may attempt to win a super majority needed to alter the constitution, they say. Next steps in monetary policy will also be more difficult to predict now as backing for new central bank governor Murat Cetinkaya, who was elected with Davutoglu’s support, may weaken.