April 19, 2018 / 5:33 AM / 4 months ago

Turkish lira moves sideways after surging on snap election news

ISTANBUL, April 19 (Reuters) - Turkey’s lira took a breather on Thursday, a day after clocking its biggest one-day advance in more than a year after President Tayyip Erdogan declared early elections on June 24.

The lira, which has plumbed a series of record lows in recent weeks on widening concern about double-digit inflation and the outlook for monetary policy, surged 2.2 percent on Wednesday, its biggest one-day advance since January 2017, after Erdogan called for early presidential and parliamentary polls.

The currency was at 4.0141 to the dollar at 0458 GMT, slightly weaker from Wednesday’s close of 4.0074.

Erdogan on Wednesday called for the snap elections, saying economic challenges and the war in Syria meant Turkey must quickly switch to the powerful executive presidency that goes into effect after the vote. The elections were initially slated for November 2019.

The rally in Turkish assets appeared “to reflect hopes in the market that (the election) will reduce political uncertainty,” William Jackson of Capital Economics said in a note to clients on Wednesday.

“However, we think there are reasons for caution. For one thing, there is a risk that policy is loosened ahead of the vote in order to shore up support for the AK Party,” he said.

Erdogan and his ruling AK Party have governed Turkey for the last decade and a half, transforming a poor, sprawling country at the eastern edge of Europe into a major emerging market. Turkey’s rapid growth, however, has been accompanied by increased authoritarianism, with a security crackdown since a 2016 failed coup leading to the arrest of tens of thousands. (Reporting by David Dolan, Editing by Sherry Jacob-Phillips)

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