Turkish lira weakens one percent on Syria operation concerns

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Turkey’s lira slid against the dollar on Monday after the White House said Ankara will soon be moving forward with its operation into northern Syria and that US armed forces will not support it or be involved.

Investors have been closely watching tense ties between Ankara and Washington in recent months, with the NATO allies at odds over a range of issues, including policy differences in Syria and Turkey’s purchase of Russian missile defense systems.

Turkey has repeatedly threatened to carry out an incursion against the US-backed Kurdish YPG militia in northeast Syria, accusing Washington of stalling efforts to establish a “safe zone” there along the Turkish border.

Following a phone call between Presidents Tayyip Erdogan and Donald Trump, the White House said on Sunday US forces would not support Turkey’s incursion and would leave the area.

The lira was trading at 5.7450 at 0717 GMT, weakening from a close of 5.7000 on Friday. Earlier, it weakened as far as 5.7575.

“While the statement from the US gives a green light to the military operation in Syria that Turkey has mentioned for a long time, it leaves many question marks regarding how the process will develop,” said a forex trader, who did not want to be named.

Turkey’s lira lost nearly 30 percent against the dollar in a currency crisis last year, sparked by concerns over political interference with monetary policy, as well as a deterioration in ties between Washington and Ankara. It is down some 8 percent this year.

Turkey’s BIST100 main share index was down 0.78 percent, while the banking index declined 1.06 percent.