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Türkiye in turmoil: İmamoğlu arrested – lira at record low!
Political turmoil in Turkey causes the lira to fall. Arrest of Mayor İmamoğlu Leads to Market Instability.
Türkiye in turmoil: İmamoğlu arrested – lira at record low!
Political turmoil in Turkey has led to a dramatic collapse in the financial markets. On Wednesday, an arrest warrant was issued against Istanbul Mayor Ekrem İmamoğlu, who is considered a major rival of President Recep Tayyip Erdoğan. According to the state news agency Anadolu, İmamoğlu is accused of membership in a criminal organization and corruption. In response to the developments, İmamoğlu's party warned of a possible coup and called for nationwide protests.
The political unrest had an immediate impact on the Turkish lira, which fell to a record low on Wednesday. The stock market experienced a dramatic decline and bond yields rose significantly. However, after the initial turbulence, the situation calmed down on Thursday after both the central bank and regulators announced interventions to stabilize the market. The central bank has $150 billion in foreign exchange reserves and may consider raising interest rates.
Financial impact
On Wednesday, an amount of around nine billion dollars was spent to support the lira. The value of the lira fell at times by more than 11% against the dollar, while it traded above 43 lira against the euro. In addition, the yield on the ten-year Turkish government bond issued in dollars temporarily rose by more than 200 basis points to just under 7.4%. The BIST 100 index fell nearly 7% on Wednesday, marking its biggest loss in seven months. This price decline destroyed a total of around ten billion dollars in the market value of Turkish stocks.
Turkey's inflation rate was 39.05% in February, falling below 40% for the first time since June 2023. Analysts report a withdrawal of foreign investors caused by political uncertainties. Selling pressure from foreign investors is expected to remain limited, but political risk to markets is significantly increased. Historically, Turkey has already had several lira crises in 2018, 2021 and 2023.
The arrest of İmamoğlu and its impact on the lira also reported Mirror Online, who analyzed the situation in the context of the ongoing financial crisis. More details on the entire situation can be found in the reporting from Frankfurter Allgemeine Zeitung.