Turkish stocks and the lira on Friday slumped to their weakest levels this year as frustration that a stand-by deal between Ankara and the IMF is still not forthcoming was compounded by market jitters world-wide. The lira weakened to the dollar for a second day, falling 1.35 percent to end at 1.5170 from an interbank close of 1.4965 the previous day.
The currency hit its lowest since December 23 in intraday trade at 1.526, and has lost nearly 3 percent this year. "There is a sell-off in emerging market currencies and if the dollar strengthens to 1.3640 to the euro, I think we could see the Turkish lira weaken to as much as 1.55 to the dollar," said a forex trader in Istanbul.
The euro's fall to seven-month lows against the dollar and the bleak outlook for euro zone economies has an impact on Turkey as European Union countries buy nearly 50 percent of Turkish exports. The benchmark ISE National 100 plunged 3.76 percent to 51,454.89, adding to losses of 2.91 percent the previous day, and reaching its lowest level since December 2009.
The MSCI index of emerging market stocks fell 3.24 percent. Economy Minister Ali Babacan was reported as saying on Thursday that talks on a new IMF stand-by deal would take shape by May, a blow to those hoping for a swift conclusion. "We fell 3 percent below end-2009 level. The sales started with the US CDS levels climbing to their 5-year high," said Ata Investment Securities' director Osman Buyukgoksu.
"The sales accelerated with eurozone woes and the reports that an IMF deal is postponed to May. It is early now for bargain hunting and it appears that sales will continue albeit at a slower rate," said Buyukgoksu. The government has been engaged in stop-start negotiations with the IMF since the last deal expired in May 2008. Hopes of a deal were rekindled by the prime minister at the end of last year, spurring renewed inflows.
But since then progress has stuttered despite the fact investors are still hankering for a deal which they hope would help Turkey reduce debt roll-over ratios, support economic recovery and anchor fiscal policy. The yield on the November 16, 2011, bond rose to 9.06 from a previous close of 9.01 percent.
Leading Turkish media group Dogan Yayin shares rebounded to rise 1.06 percent after it won a legal block on the seizure of assets, reversing a fall of more than 6 percent in the morning. Dogan Yayin, which controls a large chunk of Turkey's private media, has been locked in a dispute with Prime Minister Tayyip Erdogan's Islamist-rooted government over a series of tax fines.
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