* Fitch ratings agency downgrades 3 banks, revises outlook
* Violence in neighbouring Iraq weighing on currency
* Closed-door central bank briefing for economists eyed
By Dasha Afanasieva
ISTANBUL, June 25 Three of Turkey's leading
private banks led the country's main stock index lower on
Wednesday, after ratings agency Fitch downgraded their ratings.
The lira weakened as violence spread in neighbouring Iraq.
Fitch downgraded ratings for Isbank, Garanti
and Akbank. It also revised its outlook of
Yapi Kredi to "negative" from "stable," in line with
its parent, Unicredit, which operates in Turkey
through a an equal partnership with Koc Holding.
"The downgrades ... reflect increased risks from recent
rapid credit growth and higher external debt, against a
background of moderate deterioration in most financial metrics
in recent years," a statement from Fitch late on Tuesday said.
Turkey has introduced measures to curb rampant growth in
consumer loans and shift away from consumption-led growth, in an
effort to reduce a gaping current account deficit. The deficit
is financed by foreign capital, making Turkey vulnerable to
shifts in global liquidity.
Isbank, Garanti, Akbank and Yapi Kredi were down more than 1
percent by 0758 GMT. The main Istanbul share index fell
0.85 percent to 78,317.29, underperforming the MSCI index of
emerging markets which was down 0.45 percent.
The Turkish lira slipped on concerns about
escalating violence in neighbouring Iraq. Iraq is Turkey's
second-largest export market, and Turkish finance minister
warned the crisis is likely to weigh on the country's current
Security forces fought Sunni armed factions for control of
Iraq's biggest oil refinery on Tuesday and militants launched an
attack on one of its largest air bases, less than 100 km (60
miles) from the capital.
The lira had weakened to 2.1401 against the dollar from
2.1325 late on Tuesday, when the central bank cut its main
interest rate by 75 basis points, slightly more than expected,
citing an improvement in the global liquidity in recent months.
Turkish Economy Minister Nihat Zeybekci said on his Twitter
account on Wednesday the rate move was near market expectations
but far from meeting manufacturers' expectations.
Since an emergency rate cut at the end of January, the
central bank has been under pressure to cut rates from a
government keen to protect growth months before the first
popular presidential elections.
However, some analysts warned that the lira remains
vulnerable to global conditions despite recent improvements in
risk indications and regional instability with "considerable
"Upon the heightening of the insurgent activities in Iraq,
the Turkish lira faced the greatest depreciation pressure among
the emerging market currencies," a note from Finansbank said.
"We think that lowering interest rates in such a global
environment will expose the currency at times of deterioration
in risk perceptions."
Economists looked to a regular closed-door presentation from
the central bank in Ankara for more information on Tuesday's
decision and for signs of monetary policy and inflation outlook.
The yield on Turkey's 10-year benchmark government bond
inched up to 8.90 percent from 8.84 percent at
(Editing by Seda Sezer, Larry King)