State of emergency sends Turkish lira to fresh historic low

The Turkish lira fell to a fresh historic low of 3.0970 against the dollar early on Thursday after President Tayyip Erdogan declared a three-month state of emergency following a failed military coup.

The lira stood at 3.0610 at 0617 GMT, against 3.0970 in late trade on Wednesday after Erdogan’s announcement of the state of emergency, which enables the government to circumvent parliament in passing laws and if necessary to limit basic freedoms and rights.

“The uncertainties regarding what the state of emergency means was initially perceived negatively by markets,” wrote HSBC strategist Fatih Keresteci.

“If the state of emergency is explained properly, it could balance the market reaction.”

Erdogan declared emergency rule as he widened a crackdown against thousands of members of the security forces, judiciary, civil service and academia after a failed military coup.

Erdogan said the state of emergency would allow his government to take swift and decisive measures against supporters of the coup. He stressed the move was fully in line with Turkey’s constitution and did not violate the rule of law.

The decision took effect early on Thursday when it was published in the Official Gazette.

Hours before the state of emergency announcement, ratings agency S&P lowered its sovereign credit outlook for Turkey to “negative” from “stable”, saying the polarisation of politics had further eroded checks and balances.

S&P also said investors could expect a period of heightened unpredictability that could constrain capital inflows into the economy following last weekend’s failed military coup.

Turkey’s main share index fell 1.31 percent to 73,971.02 points by 0637 GMT, underperforming its emerging market peers which were up 0.16 percent.

The benchmark 10-year government bond yield rose to 10.24 percent from 10.07 percent at Wednesday’s close.