Photographer: Delil Souleiman/AFP viaGetty Images

Turkish Lira Slides After Trump Approves Arming Kurds

Updated on
  • ‘SELL!’ the lira, says Brown Brothers head of emerging markets
  • Deepening geopolitical tension likely to scare off investors

Turkey’s lira retreated and may fall further after U.S. President Donald Trump approved arming Kurdish forces in Syria to reclaim territory from Islamic State, spurring concern of deepening geopolitical tension.

"Sell!" Win Thin, head of emerging markets at Brown Brothers Harriman & Co., wrote in a message when asked what it means for the lira. "The move would further muddy an already convoluted situation in that region, with Turkey likely to be the biggest loser due to its proximity to the conflict."

The lira dropped more than 1 percent to 3.6221 per U.S. dollar as of 2:49 p.m. in New York. It traded as low as 3.6231, the weakest level since April 24. The latest developments could further weigh on the currency, possibly sending it toward the 50-day moving average near 3.65 per dollar, according to New York-based traders. The lira is the worst-performing emerging market currency this year, down 2.7 percent.

The U.S.’s decision was made over objections from Ankara, according to the Pentagon. Turkey, a U.S. ally and NATO member, maintains the Kurdish fighters are linked to militants in their country that the U.S. classifies as terrorists. U.S. military officials have argued that Kurdish forces are needed in the effort to retake Raqqa, the self-declared capital of Islamic State.

"It will cause investors to pause a bit and serves as a reminder that that region of the world still has a lot of challenges," said Steve Hooker, a Hartford, Connecticut-based emerging-market money manager at Newfleet Asset Management LLC, which oversees $12 billion and is overweight Turkish bonds.

The Syrian Democratic Forces, which include the Kurdish fighters, “are the only force on the ground that can successfully seize Raqqa in the near future,” Pentagon spokeswoman Dana White said by email. “We want to reassure the people and government of Turkey that the U.S. is committed to preventing additional security risks and protecting our NATO ally.”

(Updates with quote in second paragraph.)
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