The lira weakened to an all-time low and Turkish stocks fell on Monday after the Kurdistan Workers’ Party (or the PKK) killed 16 soldiers in a single attack on September 6 in Turkey’s southeast, causing more concerns over security ahead of the November polls, rattling investors. The political uncertainty emerged after the June’s inconclusive parliamentary elections has been keeping the local currency under pressure.
The lira fell as much as 1.29% in early Monday trading on the news, weakening beyond the psychological barrier of 3 to the dollar. But the currency later trimmed some of its losses, trading at 0.8% lower against the dollar at 3.0275 at 11:50 local time, shares dropped 1.28% on the back of the sharp decline in the lira.
The lira tumbled more than 20% this year against the dollar, making it one of the worst performing currencies in the emerging markets universe. Concerns about the local currency are amplified by the prospects of FED rate increase later this year. Investors are also unnerved by the central bank’s reluctance to raise interest rates to defend the currency.
PKK militants on September 6 carried out of the deadliest attacks in year, killing 16 soldiers, including two high-ranking officers in an ambush on a convoy of armoured vehicles in the Daglica district near Turkey’s border with Iraq. Turkish jets bombed several suspected PKK targets in response to the assault on the security forces.
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