Turkish Lira Drops First Time in Week as Bonds Fall on Crackdown

Turkey’s lira depreciated for the first time in a week as bonds and stocks slumped after riot police in Istanbul stepped up their crackdown on protesters and five labor unions declared a general strike today.

Benchmark bond yields jumped the most since June 11 as clashes spread out of Istanbul’s Taksim Square yesterday, a day after police moved in to clear the Gezi Park of demonstrators. Late yesterday, police fired tear gas along side streets off the square and in nearby districts. Five Turkish labor unions said they will stage a strike today to protest against the government’s “aggressive” policies, the Turkish Medical Association said yesterday after a meeting of unions in Ankara.

The “disappointment over developments over the weekend” and the “lack of an agreement to end demonstrations” puts a negative bias in the market, Tim Ash, chief emerging markets economist at Standard Bank Plc in London, wrote in an e-mailed note today.

The lira weakened 0.4 percent, the most since June 10, to 1.8665 a dollar at 5:20 p.m. in Istanbul, its first retreat in five days. The currency, which is the third-biggest decliner among 24 emerging-market peers tracked by Bloomberg today, has lost 4.4 percent in 2013. Yields on two-year benchmark notes jumped three basis points to 6.24 percent, rising for the first time in four days. The benchmark stock index fell 1.4 percent, its steepest slide in almost a week.

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The protest movement has broadened from an environmentalist rejection of proposals to build in the park into a wider movement targeting Prime Minister Recep Tayyip Erdogan’s Islamist-rooted government for what demonstrators say is its increasingly authoritarian approach to dissenting views and different lifestyles. Erdogan’s security crackdown has drawn condemnation from the U.S. and European Union.

Turkey’s central bank lent 4 billion liras (2.1 billion) at its policy rate in one-week repurchase agreements auction today. The Monetary Policy Committee will keep the repo rate at 4.5 percent and leave the overnight borrowing and lending rates unchanged at its meeting tomorrow, according to three unanimous surveys by Bloomberg.

The unemployment rate for March rose to 10.1 percent, from 9.9 percent a year earlier, Turkey’s statistics office said in a statement today. The rate was expected to advance to 10.2 percent, according to the median estimate of four economists in a Bloomberg survey.

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