Turkish lira rallies, stocks battered in wake of coup

USA stock prices rose on Monday, with the Dow Jones Industrial Average and S&P 500 posting record closes amid upbeat company earnings, while oil fell on worries about growing supply and traders brushing off a failed coup in Turkey. The iShares MSCI Turkey ETF lost 2.5 percent closing at $41.60. Meanwhile, yields on local-currency debt have spiked. The dollar was at 105.50 yen JPY= having briefly been as low as 104.63 late Friday, with trade further thinned by a holiday in Japan.

“I would not expect a major impact, the way we saw a rush to safe assets after Brexit, but there will be questions raised about Turkey’s role”, said Keith Wade, chief economist at asset management company Schroders.

“A bit of political risk premium has to be repriced in the forex and bond market, this has already happened to some extent”, said Murat Toprak, emerging market strategist at HSBC.

Since the beginning of the year, foreign investors have bought up Turkish assets, reversing sharp declines that were driven by expectations that the Federal Reserve would soon raise interest rates.

It added that the current foreign exchange deposit limit of around 50 billion USA dollars may be increased. The dramatic coup attempt in Turkey also pushed oil prices higher due to Turkey strategic position and political significant in Oil market.

The yen sagged as investor risk aversion eased.

Ultimately, the economic repercussions of the failed coup will depend on the political fallout.

The currency is likely to strengthen to 2.95 or even 2.90 per dollar, Ghose said in an e-mailed report before trading started.

Thousands of Turkish army officers and judges were swept up in a nationwide wave of arrests as President Recep Tayyip Erdogan and the ruling AK Party moved to cement power, while officials promised over the weekend unlimited liquidity to lenders and measures to support the lira. Gulen has denied the accusations. Going forward, stability is the main key for Turkey.

Sterling rose 0.55 percent against the dollar to $1.3265.

Some emerging-market currencies that dropped along with the lira including the South African rand and Mexican peso, regained their losses.

Ankara said it was in control of the country and economy and widened a crackdown on suspected supporters of the failed military coup, taking the number of people rounded up from the armed forces and judiciary to 6,000.