🎁 💸 Warren Buffett's Top Picks Are Up +49.1%. Copy Them to Your Watchlist – For FreeCopy Portfolio

Traders Brush Off Turkey Sanctions, But Warn Worse Could Come

Published 10/15/2019, 04:53 AM
Updated 10/15/2019, 05:25 AM
© Reuters.  Traders Brush Off Turkey Sanctions, But Warn Worse Could Come

(Bloomberg) -- Investors in Turkish markets brushed off Monday night’s U.S. sanctions, though some warned that harsher penalties could still come.

The lira strengthened as much as 1% before paring gains to 0.2%, trading at 5.9142 per dollar as of 11:48 a.m. in Istanbul. Turkey’s main BIST 30 climbed 1.5%. Those moves only partially eroded losses that have made Turkish assets among the worst performers in emerging markets this month.

Since President Donald Trump warned on Oct. 7 that he could “obliterate” Turkey’s economy if Ankara did anything he considered “off limits” with its incursion into Syria, traders have braced for sanctions that would deal a severe blow to the Turkish financial system.

“It’s a short-term relief,” said Piotr Matys, a strategist at Rabobank in London. “The risk that far more consequential and punitive measures could be used by the U.S. prevails as the military operation in northern Syria continues.”

For now, Washington is sanctioning three senior Turkish officials and increasing steel tariffs. The penalties may have little impact on the wider economy and are in line with measures adopted last year, which were subsequently removed as relations between the NATO allies improved.

Much depends on how Turkish President Recep Tayyip Erdogan responds. On Monday, he said the offensive in Syria would continue no matter what.

“I fear that Erdogan will not be able to help himself, and we will see retaliation,” said Timothy Ash, a strategist at BlueBay Asset Management in London. “If they decide to respond, tit for tat, it could get ugly with a game of escalation between the two sides.”

The sell-off this month has created opportunities for investors brave enough to jump in. Real yields on Turkish local-currency government bonds have climbed to the highest level in a year. The Borsa Istanbul 100 Index of equities fell more than 5% on Monday and touched it’s lowest level since June.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.