8 Jun 2015
Political uncertainty weighs heavily on lira – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, notes that the Turkish lira has fallen almost 5% versus the dollar after the ruling AK party lost majority in the parliament for the first time since 2002.
Key Quotes
“The Turkish lira has been the main mover in early trading this week falling sharply by over 5.0% against the US dollar following yesterday’s shock Turkish election result. The ruling AK party has lost its majority in parliament for the first time since 2002. With more than 99% of the votes counted, the AK party is set to win 258 seats in parliament falling short by the 18 seats required to a form a majority government. The AK party’s declining popularity combined with the advance of the pro-Kurdish People’s Democratic party (HDP) which secured 13% of the vote and can now enter parliament have both contributed to the AK party losing its majority.”
“The constitution requires a coalition to be formed within 45 days. If that proves impossible, the president can call another election. All three opposition parties have signalled that they don’t want to form an alliance with the AK party. The most likely outcome is seen as the AK party remaining in government as a minority administration but it may not complete a full four-year term which could lead to an early election.”
“Heightened political uncertainty in Turkey reinforces our negative outlook for the Turkish lira. It will further complicate the financing of Turkey’s elevated current account deficit which is becoming more challenging as external financing conditions tighten ahead of upcoming rate hikes from the Fed.”
Key Quotes
“The Turkish lira has been the main mover in early trading this week falling sharply by over 5.0% against the US dollar following yesterday’s shock Turkish election result. The ruling AK party has lost its majority in parliament for the first time since 2002. With more than 99% of the votes counted, the AK party is set to win 258 seats in parliament falling short by the 18 seats required to a form a majority government. The AK party’s declining popularity combined with the advance of the pro-Kurdish People’s Democratic party (HDP) which secured 13% of the vote and can now enter parliament have both contributed to the AK party losing its majority.”
“The constitution requires a coalition to be formed within 45 days. If that proves impossible, the president can call another election. All three opposition parties have signalled that they don’t want to form an alliance with the AK party. The most likely outcome is seen as the AK party remaining in government as a minority administration but it may not complete a full four-year term which could lead to an early election.”
“Heightened political uncertainty in Turkey reinforces our negative outlook for the Turkish lira. It will further complicate the financing of Turkey’s elevated current account deficit which is becoming more challenging as external financing conditions tighten ahead of upcoming rate hikes from the Fed.”