(Adds details, bonds, equities)
By Dasha Afanasieva
ISTANBUL Aug 8 Turkey's lira slipped to its
weakest since March 31 on Friday as investors fled to safe
havens unnerved by the prospect of U.S. air strikes in
neighbouring Iraq, two days ahead of Turkey's first direct
U.S. President Obama authorised air strikes in Iraq late on
Thursday to protect the besieged Yazidi minority and U.S.
personnel in Iraq as Islamic State militants looked to be little
over 30 minutes' drive from Arbil, the capital of Iraqi
Thousands of Iraqis, most of them ethnic minority Yazidis,
followers of an ancient religion derived from Zoroastrianism and
part of Iraq's Kurdish minority, have fled to the Turkish
The lira reached 2.1880 against the dollar and stood at
2.1778 by 0719 GMT compared to 2.1638 late on Thursday.
Turks go to the polls on Sunday to elect their president for
the first time with Prime Minister Tayyip Erdogan widely
expected to win.
In contrast to his rivals, Erdogan is seeking to establish
an executive presidential system in Turkey, which critics say
would serve to tighten his grip, concentrating more power in the
hands of a man they say has polarised Turkish society along
secular-religious lines and risking a further politicisation of
Senior party officials have told Reuters that Erdogan, as
president, is likely in the beginning to work with a "council of
wise men" to help him oversee top government business as he
works towards enacting changes to the constitution to introduce
an executive presidency.
Investors were set to focus on the economic team to gauge
how effective they would be at dealing with external shocks.
Riskier assets such as Turkish equities also suffered as
investors worried that a deteriorating relationship between
Russia and the West could sap global growth, after Moscow
imposed a one year ban on meat, fish, dairy, fruit and
vegetables from the United States, the European Union, Canada,
Australia and Norway.
The main Istanbul share index fell 0.98 percent to
78,070 points, underperforming the broader emerging markets
index which was down 0.65 percent.
Shares in Islamic Bank Asya remained suspended
having fallen sharply on Thursday. Authorities cancelled its tax
collection and social security payment deals and on Friday an
exclusive deal with Qatar Islamic Bank (QIB) to
acquire a stake in the Turkish lender was annulled.
Bank Asya has seen its profits and capital base collapse
since it found itself at the centre of a power struggle between
Prime Minister Tayyip Erdogan and his former ally Fethullah
Gulen, the Islamic cleric whose sympathisers founded the bank
but has since become Erdogan's enemy.
The benchmark 10-year government bond yield
fell to 9.4 percent from 9.46 percent at Thursday's close.
(Editing by Ece Toksabay and Alison Williams)