The Turkish lira weakened some 0.6 percent against the dollar on Tuesday as investors grew increasingly concerned about an escalation of violence between Syrian government forces and Turkish forces in northwest Syria.
Five Turkish soldiers were killed in shelling by Russia-backed Syrian forces on Monday, marking the second deadly attack on Turkish forces in Syria’s Idlib province within a week.
The lira, whose volatility has spiked since a late Friday selloff, weakened as far as 6.0500 against the dollar from a close of 6.0075 on Monday. It stood at 6.0305 at 1305 GMT.
Worries over Turkey’s increased military involvement in Syria have been growing, said Jason Tuvey, senior emerging markets economist at Capital Economics.
“The latest developments certainly raised concern that tensions will continue to flare up,” he said, adding that government efforts to artificially prop up the lira would “ultimately... prove futile.”
Turkish state banks have sold tens of billions of dollars over the last year to stabilize the lira, which lost 36 percent of its value in two years following a currency crisis in 2018.
“Given (Turkey’s) low foreign exchange reserves, the country’s large external debt, it just cannot be sustained for very long at all,” Tuvey said.
A London forex trader said local banks had continued to sell dollars on Monday around the 6.02 level albeit at smaller volumes than last week.
The lira also declined to 6.05 on Friday, its weakest point in regular trading since late May. It recovered briefly on Monday after the government imposed new limits on banks’ foreign-exchange.
On the Istanbul stock market, the main BIST 100 index was up 0.86 percent at 1234 GMT, while the banking index was 0.12 percent lower.
Turkish lira falls as investor concerns grow over Syria escalation