March 1, 2019 / 3:51 PM / 9 months ago

Turkey's lira weakens as EM sentiment weighs

ISTANBUL, March 1 (Reuters) - Turkey’s lira eased around 1 percent against the dollar on Friday, weighed down by concerns over inflation data and cheap bank loans, as well as a broader easing of emerging market currencies in the face of rising U.S. Treasury yields.

“The sell-off to a degree can be attributed to worsening sentiment towards emerging markets, particularly towards high-yielding EM currencies,” said Piotr Matys, emerging markets forex strategist at Rabobank.

The lira stood at 5.3930 against the dollar at 1545 GMT, weakening from Thursday’s close of 5.3385. Earlier it weakened as far as 5.4010, its lowest since Jan. 16.

The currency has been relatively stable in recent weeks, compared to the sharp volatility last year when it lost nearly 30 percent against the dollar on concerns over central bank’s independence.

Matys also cited a 25 billion lira package for small- and medium-sized businesses announced on Friday, which he said could be interpreted as a sign that authorities were seeking to boost growth ahead of March 31 local elections.

Guillaume Tresca, senior emerging market strategist at Credit Agricole, said the modest rise in Istanbul retail price inflation on Friday could point to a very slight increase in next week’s national inflation data.

Another trader cited a Bloomberg report that Turkey had rejected an offer from the United States to deliver a Patriot missile defense system by the end of 2019.

U.S. officials have warned that Turkey’s purchase of Russian S-400 defence systems would jeopardize Ankara’s purchase of F-35 jets and possibly result in U.S. sanctions.

“Regarding the selling pressure in the market, we also need to mention the concerns about relations with the United States,” a forex trader at a Turkish bank said.

“We are observing the possible negative impact of the choice between the Patriots with the U.S. and the S-400s on the relations between Turkey and the U.S.”

Turkish officials were not immediately available to comment on the report. (Reporting by Ali Kucukgocmen and Nevzat Devranoglu Editing by Dominic Evans)

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