The under-pressure lira held steady against the dollar on Wednesday after U.S. President Donald Trump’s national security adviser said Turkey had made a “big mistake” in not freeing a U.S. pastor held on terrorism charges.
The lira has lost 37 percent of its value this year in a crisis triggered by concerns over President Tayyip Erdogan’s influence on monetary policy and excerbated by the dispute with Washington.
U.S. National Security Adviser John Bolton told Reuters during a visit to Israel that Ankara “made a big mistake in not releasing Pastor (Andrew) Brunson”.
The case was likely to continue to add to the lira’s woes, said Per Hammarlund, chief emerging markets strategist at SEB.
“Ultimately, they will release Brunson but it will take a while and as long as there is a risk to U.S. dollar flows to Turkish banks or to Turkey in general, then the lira will be under pressure,” Hammarlund said.
“I wouldn’t be surprised if we see another bout of volatility in the lira and a sharp weakening again.”
The lira stood at 6.0500 at 1111 GMT, compared with a close of 6.0600 on Tuesday. Trade was thinner than usual and probably mainly offshore after Turkish markets closed at midday on Monday for a week’s holiday to mark the Muslim Eid al-Adha festival.
Turkish sovereign dollar bonds rose across the curve, with some issues gaining around 1.5 cents. The March 2036 Eurobond US900123AY60=TE rose 1.52 cents, according to Tradeweb while the March 2038 issue US900123BB58=TE gained 1.49 cents.