Turkish assets slide as political crackdown widens
The detentions, which prosecutors say are part of anti-corruption investigations, are seen by the opposition and some foreign leaders as an effort by President Tayyip Erdogan to weaken the Republic People's Party (CHP).
Jamie Fallon of Tellimer said the detentions had "fuelled fears around the rule of law and political instability".
Turkish assets are notably sensitive to domestic politics, with foreign investors crowding back in after Erdogan's return to orthodox economic policies in 2023, but prepared to ditch them if the latest political developments impact those policies - or the economy more broadly.
The lira slid by some 0.2% to beyond 40 against the dollar, before clawing back some of the losses, to trade at 39.99 at 1025 GMT, still weaker than its close on Friday.
Turkey's international dollar bonds also slid, with the 2045 maturity shedding nearly 1 cent to be bid at 85 cents on the dollar. And the country's five-year credit default swap, an indication of the cost of insuring its debt against default, widened by 13 basis points from Friday's close to 292 bps.
The mayors of the big southern cities of Adana, Adiyaman and Antalya were taken into custody as part of a corruption investigation, expanding a months-long legal crackdown well beyond its origins in Istanbul.
Istanbul's benchmark BIST 100 index was down 1.25% at 1050 GMT. The banking index was down 0.58% at the same time, after an earlier drop of 1.68%.
The lira has weakened some 11% so far this year on concerns over domestic politics and conflicts in neighbouring countries.
There are expectations that Turkey's central bank would begin cutting rates again this month, but the lira's weakness — and the economic impact of the political developments — has thrown that prospect into question.
Hilmi Yavas, an Istanbul-based independent macro strategist, said the bank's efforts to stabilide the economy were already under pressure.
"High real interest rates still seem necessary to contain domestic demand for foreign currency, while services inflation remains more elevated than a central banker would find comfortable," Yavas said. "Meanwhile, tight monetary policy is placing increasing strain on the real economy."
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