Turkish Lira Drops on Corruption Probe, Police Dismissed by Government

by on December 20, 2013 4:24 pm GMT

The Turkish lira drops to a record low against the dollar as bonds sell-off with the Prime Minister Recep Tayyip Erdogan’s government rides police leadership in retaliate to a probe into official corruption.

This drop resulted in the largest among emerging market currencies as rates fall to 2.0947 lira per dollar and 2.8636 lira per euro. Public debt falls in tandem with the two-year benchmark note increasing 25 bps to 9.61 percent. The benchmark’s yield hits a high since mid-September.

In retaliation to officials being detained on corruption, including the head of a state bank, over 50 police department chiefs were dismissed by the goverment, according to a Bloomberg report. “Political risk has increased considerably,” said Melih Onder, chairman of Logos Portfoy Yonetimi AS.

In response to the lira’s decline, the Turkish central bank said it would increase the amount of dollar it sells for liras ten fold. The central bank will sell $50 million at an auction today and another $250 million on December 23.

Year-to-date the Turkish lira is down 15 percent against the greenback making it one of the worst major emerging market currency performances. Since May 22, the benchmark two-year not increased 457 bps.