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Turkish lira weakens after Fed, Bank Asya see-saws
September 18, 2014 / 7:38 AM / in 3 years

Turkish lira weakens after Fed, Bank Asya see-saws

ISTANBUL, Sept 18 (Reuters) - The Turkish lira fell to a 5-1/2 month low on Thursday after the U.S. Federal Reserve’s outlook for rising rates stoked concerns that emerging assets may lose some of their yield appeal.

Trade was volatile in Bank Asya, an Islamic finance institution, which surged 11 percent to 0.71 lira ($0.32) after sliding 11 percent at the opening.

The share has sunk 43 percent this week since it resumed trading on Monday following a suspension of trade on Aug. 7 due to uncertainty over the bank’s ownership.

The lira eased as far as 2.2285 against the dollar before edging back up to 2.2239 by 0716 GMT, compared with 2.2073 late on Wednesday.

The Fed on Wednesday suggested it could raise interest rates faster than expected when it starts increasing, although it renewed its pledge to keep borrowing costs near zero for a “considerable time.”

Turkey is susceptible to changes in global liquidity conditions due to its large current account gap.

“While the statement and press conference were more dovish than expected, participants’ expectations for the Fed funds rate drifted higher and suggested a faster pace of rate hikes,” said Erkin Isik, a strategist at TEB-BNP Paribas.

“The U.S. 10-year yield is higher at 2.62 percent after the meeting and this led to weaker performance in emerging markets.”

Istanbul’s main share index fell 1.25 percent to 77,974.18 points, compared with a 0.61 percent drop in the emerging markets index.

The benchmark 10-year government bond yield rose to 9.36 percent from 9.20 percent a day before. (Reporting by Seda Sezer, editing by John Stonestreet)

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