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Turkish lira hits low after election

Monday, June 08, 2015 - 01:48

The Turkish lira has tumbled to a record low and stocks were hammered as investors fretted over the possibility of a minority or coalition government. As Hayley Platt reports the ruling AK Party failed to win a majority in a parliamentary election.

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It wasn't unexpected but the political uncertainty in Turkey after weekend elections still sent the lira tumbling to a record low. It fell 5 percent against the dollar after the ruling AKP party failed to win a majority, taking the total fall for the year to 15 percent. That could put pressure on the central bank to raise interest rates to try and curb inflation. Something President Tayyip Erdogan hoped wouldn't happen. Jane Foley is a Senior Currency Strategist at Rabobank. SOUNDBITE (ENGLISH) RABOBANK, Senior Currency Strategist, JANE FOLEY, SAYING: "Turkish central bank has many complicated tools at its disposal and what it's done today is reduce the rate of its dollar deposits but of course a rate hike could arguably be the one tool which could try and stabilise the Turkish lira but of course that would be very a controversial decision and very difficult for Turkey to potentially tolerate a rate hike in the current climate." Turkish stocks slumped, topping the list of global fallers on the MSCI index of emerging markets, sliding by six percent. Turkey's 10-year benchmark bond also rose to just below 10 percent. Finance Minister Mehmet Simsek playing down the reaction. (SOUNDBITE) (Turkish) TURKISH FINANCE MINISTER, MEHMET SIMSEK, SAYING: "This was expected. They started pricing the risk premium. Therefore, this is not a surprise." Turkey's stalling economic growth, high debt levels and reliance on external financing was already worrying investors. And most had been hoping the AKP party would win enough votes to retain a majority without handing Erdogan greater power. Instead they got no guarantee of long-term political stability and that could mean further volatility in the coming weeks.

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Turkish lira hits low after election

Monday, June 08, 2015 - 01:48