Turkey’s lira and stocks rose on Monday on hopes of a thaw in relations between Ankara and Washington while a late rally last week on Wall Street offered little respite for other emerging market stocks, which hovered near 1-1/2-year lows, Reuters writes.
The lira gained for a second day after the release and return of a detained U.S. pastor, Andrew Brunson, offered relief to the currency that has shed more than 35 percent in value this year. The country’s BIST 100 stock index rose 1.3 percent, led by a rally in the banking shares ahead of a central bank meeting next week.
“The lira is likely to benefit at least modestly during the period between now and the CBT meeting of 25 October where we anticipate the next 300 bps rate hike,” ING analysts wrote in a note. “This geopolitical story was at best a distraction – the real issue about the lira is the lack of inflation targeting by the central bank.”
According to Bloomberg, the lira was expected to extend an advance on the release of Andrew Brunson, yet investors last week held fire after a five-day rally fueled by speculation his release was imminent. The pastor was sentenced to more than three years in jail but freed on time served, over his alleged involvement in a 2016 coup attempt.
An unprecedented diplomatic breakdown between the NATO allies over the case compounded an almost 40 percent depreciation in the currency this year. The U.S. imposed sanctions on Turkey over Brunson’s continued detention in August, and his release could go some way toward restoring battered investor confidence, stemming an outflow of foreign capital as the Turkish economy slides toward a recession.
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