As expected, the Turkish lira rose sharply against the dollar in early trading Sunday evening after President Recep Tayyip Erdogan won a historic referendum that clears the way for him to consolidate power in a reconstituted (literally) presidency.
“Currency jumps as much as 2.4% vs the dollar to touch 3.6188 in early trade, the highest level in almost three weeks, as Turkish voters voted to endow President Recep Tayyip Erdogan with sweeping executive powers,” Bloomberg wrote this evening.
Here’s a bit more color:
- The victory is seen by many as helping put to an end months of political wrangling and uncertainty that had weighed on investor confidence
- Lira crosses 100-DMA at 3.6457/USD, a level it last tested on March 27, and traded at 3.6350 against the greenback as of 00:27 am in Istanbul
- The outcome removes prevailing uncertainty in Turkish politics, “at least in the short-term,” says Rabobank’s Piotr Matys who sees scope for the lira to rally to 3.5561 against the dollar, and then 3.40 as “the next potential short-term target”
- Nomura’s Inan Demir expects a relief rally in TRY and a steepening pressure of the yield curve, but the extent of the advance will depend on the possibility of early elections or a cabinet reshuffle, the timing of monetary easing, and Turkey’s relations with Western allies, he says
- The narrow margin of victory may be seen by markets as an argument against early elections, “for it might imply an erosion in AKP’s parliamentary majority”