ISTANBUL: The Turkish lira hovered near record lows on Friday as investors worried whether Central Bank Governor Erdem Basci would continue in his post after President Tayyip Erdogan's blistering criticism of the bank.
Erdogan said on Wednesday that the bank's monetary policy was "unsuited to the realities of the Turkish economy" after it failed to meet his demands for rate cuts larger than those it made on Tuesday. He questioned whether the bank was under external influence.
Market attention was focused on whether Erdogan would keep up the pressure or seek to lower tension when he speaks at a lunch he is hosting for provincial governors at the presidential palace.
"President Erdogan's comments will be critical for the market today. We could see strong selling pressure if he continues his criticisms of Basci today. Even worse, we could start to price in Erdem Basci not continuing (in his post)," said one senior banker.
The lira stood at 2.5015 against the dollar, weaker than 2.4960 late on Thursday and near an all-time low of 2.5155 which it hit two weeks ago.
The main share index was 0.11 percent higher at 86,010.72 points, having fallen 0.94 percent on Thursday.
The yield on the benchmark 10-year government bond rose to 8.37 percent from a spot close of 8.21 percent on Thursday.
As speculation swirled around Basci's future, a central bank spokesman on Thursday said the governor had had a health check but no serious health problem was found and he will return to his duties on Friday afternoon.
Traders viewed Erdogan's questioning of whether the bank was under external influence as a thinly veiled reference to US-based cleric Fethullah Gulen, a former ally whom Erdogan accuses of infiltrating state institutions in a bid to unseat him. In the past year, its followers have been systematically purged from bodies including the police and judiciary.
Erdogan's criticism has also triggered speculation about the future of respected Deputy Prime Minister Ali Babacan, an anchor of investor confidence in Turkey for more than a decade.
Babacan, who is in charge of the economy and has been a staunch defender of central bank independence, met Prime Minister Ahmet Davutoglu for more than two hours following Erdogan's comments, which rattled financial markets.
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