(Adds analyst comment, details)
ISTANBUL Jan 6 Turkey's lira hit a new record
low against the dollar on Monday, dampened by investor caution
over a corruption investigation, concern about China's growth
outlook and U.S. Federal Reserve stimulus reduction.
The lira traded at 2.1905 by 0902 GMT, weakening
from 2.1774 late on Friday, having reached a previous record low
of 2.1885 on Thursday. It weakened 17 percent in 2013.
The Federal Reserve will begin winding down, or tapering,
its $85 billion-a-month money-printing programme this month, and
emerging markets are seeing foreign investment pull back as a
result. Turkey is among the most vulnerable with its huge
current account deficit and its reliance on external financing.
Turkish assets have been under additional pressure since
Dec. 17 when a wide-ranging graft probe began with a series of
dawn raids and arrests and has led to the resignation of three
ministers and the dismissal of dozens of police officers.
It has revealed fractures within the AK Party, which has
ruled for over a decade, and unnerved investors in the run-up to
local elections this year, prompting a sharp selloff of Turkish
While the lira has hit new record lows, the central bank has
stuck to its unorthodox method of supporting the lira mainly
through dollar sales.
It has sold $17.6 billion in forex auctions since the
beginning of last year. This month it will sell a total of $3
billion, it said previously. But pressure for interest rate
hikes is growing as the lira's slide continues.
Standard Bank's Tim Ash said Turkish assets would continue
to be put under pressure until there was an improvement in the
political situation or the central bank started hiking interest
The main Istanbul stock index was up 0.42 percent
at 66,245 points but outpaced the main emerging market index
which was down 0.8 percent.
The yield on Turkey's 10-year benchmark bond
was steady at 10.53 percent compared with 10.52
late on Friday.
(Reporting by Seda Sezer, editing by Elizabeth Piper)