Turk assets' fall persists amid global, internal triggers

The yield on the benchmark government bond broke above 21 percent, new-high since January 2007.

 

The lira traded at 1.2465 to the dollar, having earlier weakened as much as 1.3 percent on the day to 1.2510, the Istanbul Stock Market closed the morning session 1.24 percent down. The yield on the benchmark government bond broke above 21 percent, new-high since January 2007.Â

 

The bond yield ended its trade slightly over its 20.20 percent value Thursday and broke its support level to hit 20.78 percent on Friday when the global negative news added to the current turmoil in the political arena with investor's rising expectations for Turkey's ruling AKP’s closure on Friday.

 

Turkey's Constitutional Court annulled the bill lifting the headscarf ban in universities, saying it violated the secularism principles of the Turkish Constitution. The verdict on Thursday fueled expectations the ruling AKP might be closed since the bill was seen as the main evidence in the indictment filed against the AKP.

 

The lira traded at 1.2465 to the dollar, having earlier weakened as much as 1.3 percent on the day to 1.2510. And the Istanbul Stock Market started trading by 571 points loss and then later recovered to 491 points at the end of the first half with a 1.24 percent loss.

 

In the global financial markets, the euro rose against dollar and the drop in the dollar caused oil prices to jump to an all time high of $139.12 on Friday.

 

The dollar slumped in global markets on Friday after data showed the United States economy lost jobs for the fifth straight month and the unemployment rate shot up to its highest in more than three years. Since oil's direction has also become increasingly intertwined with the dollar, the drop in the dollar caused oil prices to jump to an all time high.

 

The weak United States labor market data and subsequent violent weakness in U.S. equities is also seen as another reason for the likelihood of renewed risk aversion.

 

The rapid rise in oil prices is also not good news for Turkey as it is likely to increase the current account deficit further. In 2007, approximately 20.6 percent of Turkey's record current account deficit came from oil imports. Turkey’s current account deficit is expected to exceed $40 billion in 2008 from $38 billion.