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Turkey's Erdogan says to take aim at Moody's following June elections

ISTANBUL (Reuters) - Turkish President Tayyip Erdogan has threatened to take action against Moody’s after June 24 elections, his latest broadside against credit rating agencies that he says are trying to bring down the economy.

Turkish President Tayyip Erdogan greets his supporters during an election rally in Nigde, Turkey June 11, 2018. Murat Kula/Presidential Palace/Handout via REUTERS ATTENTION EDITORS - THIS PICTURE WAS PROVIDED BY A THIRD PARTY. NO RESALES. NO ARCHIVE.

Erdogan, a self-described “enemy of interest rates”, has long cast chronic weakness in the lira currency as the work of Western powers determined to weaken his government. He has ascribed the sell-off to a shadowy “interest rate lobby” and has repeatedly singled out Moody’s, Standard & Poor’s and Fitch for their criticism of Turkey’s economy.

All three agencies rate Turkey’s debt as “junk”, or non-investment grade, and have highlighted concern about the economic outlook given rising authoritarianism and Erdogan’s drive for lower interest rates.

“God willing, after June 24 we will mount an operation on that Moody’s,” Erdogan said during an interview with private broadcaster 24 TV late on Wednesday.

“They make unusual statements even though we are not a member of Moody’s... You’re a firm in such an important position and you take steps saying ‘How do I stain Turkey? How do I put them in a tough position?’ They will not succeed.”

A spokeswoman for Moody’s declined to comment.

Erdogan did not elaborate on the nature of the potential action, but his comment that Turkey was not a “member” of Moody’s suggested he may have been referring to a different agency altogether, Standard & Poor’s.

Turkey solicits ratings from Moody’s and Fitch. Its rating from S&P is unsolicited. Since many international funds require two ratings to invest in a country’s debt, investor sentiment would be impacted if Turkey were to drop Moody’s.

“Investors depend on these agencies in making their investment decisions,” said Tim Ash, a strategist at BlueBay Asset Management on Twitter. “Cancelling it to one means that so many foreign funds will not be able to invest in Turkey. Total disaster if that happens...”

The lira was slightly firmer on the day at 4.6300 to the dollar at 1256 GMT, as investors appeared to shrug off the comments.

Moody’s last week downgraded and placed on review for further downgrade the ratings of 17 Turkish banks. It said the downgrades reflected its view that “the operating environment in Turkey has deteriorated, with negative implications for the institutions’ funding profiles”.

The lira has fallen some 18 percent this year, hitting a series of record lows and forcing the central bank to aggressively hike rates to stop the sell-off.

Erdogan and his ruling AK Party face presidential and parliamentary elections on June 24.

Writing by David Dolan; Editing by Gareth Jones