* Lira hovering around new record lows
* Reuters poll says lira expected to stabilise in coming
* Technical issue on stock exchange, trading to resume after
By Dasha Afanasieva
ISTANBUL, Jan 9 Prime Minister Tayyip Erdogan's
public feud with judiciary and police force over a corruption
scandal shaking his government continued to weigh on Turkish
markets on Thursday, with the lira touching record lows.
Since mid-December Turkish assets have been battered by a
wide-ranging corruption investigation which came to light with
a series of dawn raids and arrests that led to the resignation
of three ministers. Erdogan has rejected the accusations as an
attempt by a U.S.-based cleric to taint his AK party before
March local elections that will be a test of his support.
There is no clear sign yet of the scandal undermining his
popularity but it has exposed some dissent in his AK Party.
"A weak showing by the AKP in the local elections might give
grist to the mill of his opponents within the AK party - perhaps
inspiring (Presideent Abdullah) Gul and those around him to
offer an alternative platform to sustain the AK party's legacy,"
Timothy Ash, head of emerging market research at Standard Bank
said in a note.
But ratings agency Moody's, which raised Turkey's sovereign
credit rating to investment grade last May, said on Wednesday
that domestic political risk was already embedded in its rating
for the country.
The lira slipped slightly to 2.1880 by 0950 GMT
from 2.1776 late on Wednesday having touched an all time low of
2.1980 earlier in the morning.
But a Reuters poll showed on Wednesday that the lira is
likely to stabilise against the dollar in coming months despite
pressure on it due to capital flows out of emerging markets and
Most traders expect the central bank eventually to hike
interest rates to support the currency, but it has so far
refused to do so for fear of slowing economic growth, especially
before the elections.
The main Istanbul stock index, which last updates
at 0752 GMT because of a technical fault, was trading down 1.18
percent at 66,536.95 points, underperforming the main emerging
market index, which fell 0.55 percent.
The stock exchange said that having stopped the first
trading session early, it would open the second session at
normal time which is between 1210 and 1215 GMT.
The yield on Turkey's 10-year benchmark bond
eased to 10.09 percent from 10.18 percent late on Wednesday.
(Editing by Ralph Boulton)