Turkish lira dips, CDS costs soar on Ukraine concerns

ISTANBUL: Turkey's lira slid 1.3% and the cost of insuring against debt default jumped on Monday as worries over the Ukraine conflict's impact grew, with surging oil prices adding to inflation concerns.

The lira weakened as far as 14.4 to the dollar from a close of 14.2155 on Friday, and was at 14.3775 by 1232 GMT. The cost of insuring against debt default hit its highest level since the global financial crisis in 2008.

After trading in a narrow range so far this year, the lira weakened after Russia launched its invasion on Feb. 24 and is currently 8.4% weaker than at the end of 2021, a year in which it lost 44% of its value.

The war threatens to stoke inflation, which hit 54% in February, as well as widen Turkey's current account deficit, threatening to derail President Tayyip Erdogan's new economic programme which aims to achieve a surplus.

As oil prices soar, major energy importer Turkey is facing a higher fuel bill and the loss of tourists from Russia and Ukraine, two of its key markets.

Turkish lira slides 1.5% against dollar on Ukraine risk

Finance Minister Nureddin Nebati said in a speech on Monday the government was determined to take the necessary steps to fight rising prices as a priority as global oil and grain prices surge.

Turkey's 5-year Credit Default Swaps, which pay out in the event of a default, rose 17 basis points to 677 bps, data from IHS Markit showed, as premiums on other emerging markets also jumped.

Authorities had been able to contain the lira in a tight band until late February through costly interventions in the forex market and a scheme that protects lira deposits against depreciation.

In an extension of the scheme, companies now have the option to open such deposit accounts with a three-month maturity, in addition to the existing six-month and 1-year options, the country's Official Gazette said on Monday.

The central bank is estimated to have sold $20 billion in reserves to support the lira in December and some $3 billion in January. It spent $4 billion of its reserves the week before last and at least another $1-2 billion last week to support the lira, bankers' calculations show.