Turkey's lira weakened on Thursday on concerns over troubled US ties due to Ankara's plan to buy a Russian S-400 missile defence system, and it failed to rebound when the government unveiled a $4.9-billion package for struggling importers.
Softer economic data this month also weighed as the lira stood at 6.1340 against the dollar at 1306 GMT, shedding some 0.65% from Wednesday's close of 6.0945. It weakened as far as 6.1510 earlier in the day. Investors were still digesting comments late on Tuesday by Defence Minister Hulusi Akar who said Turkey was preparing for potential US sanctions over its purchase of the S-400s, even while he said there was some improvement in talks with the United States over buying F-35 fighter jets.
There are "fresh concerns over the escalation of tension between Turkey and the United States," said Jason Tuvey, senior emerging market economist at Capital Economics. "Investors are getting increasingly concerned that this (sanctions) could be how it plays out." Confidence in the lira among Turks fell after last year's currency crisis, with local individuals' forex holdings rising steadily in the six months to April.
Locals' forex holdings reached a record high as of May 17, standing at $182.26 billion. Several indicators also deteriorated in May, signaling a downturn in economic activity as Istanbul mayoral elections were annulled and rescheduled for June 23.
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