(Adds market reaction and details)
ISTANBUL Aug 15 Turkey's lira eased on Friday
as political uncertainty in the aftermath of Tayyip Erdogan's
presidential election victory persisted, with Moody's warning
the outlook was likely to remain unstable until at least the
middle of next year.
Erdogan's victory in Sunday's vote did not resolve the
country's credit challenges, Moody's said, and the political
landscape would remain uncertain until at least the conclusion
of parliamentary elections, due by June 2015.
Turkish markets initially took Erdogan's win as a sign of
continuity, firming early on Monday, but have since traded less
optimistically. The lira weakened to 2.1620 to the
dollar by 0955 GMT from 2.1514 late on Thursday.
"Until the political landscape reaches some stability, the
country's structural reform agenda is likely to suffer, leaving
Turkey exposed to potential shifts in international market
sentiment," Alpona Banerji, vice president and senior analyst at
Moody's, said in a note.
The ratings agency said the credit implications of the
election would not be clear until a new prime minister is
appointed in late August and a parliamentary election held.
Erdogan expects to announce his new prime minister as early
as next week following a meeting of his ruling AK Party's senior
leadership, he told reporters late on Thursday.
Erdogan, who remains prime minister until he is inaugurated
on Aug. 28, wants a staunch loyalist as his replacement who can
hold the AK Party together and win a stronger parliamentary
majority in the election.
That would boost his chances of pushing through the
constitutional change needed to introduce the presidential
system he has long coveted for Turkey.
Moody's also forecast Turkey's economy would grow by 3
percent this year, down from 4 percent in 2013, and raised
concern about the independence of monetary policy.
"A series of rate cuts to the one-week repo rate between
January and July and one cut to the overnight borrowing rate
increase inflation risks in Turkey and are likely to fuel
questions about the central bank's independence," it said.
Erdogan, wedded to the idea that high interest rates cause
inflation, has repeatedly called for the central bank to make
sharper interest rate cuts.
Istanbul's main share index was up 0.05 percent at
77,610.12 points, slightly underperforming the broader emerging
markets index, which was up 0.14 percent.
The benchmark two-year government bond yield
fell to 9.22 percent from 9.24 percent on Thursday.
(Reporting by Ece Toksabay; Editing by Nick Tattersall and