Economy

Lira eases drop as initial shock over sanctions threat subsides

Turkish lira/Bloomberg

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The risk of US sanctions over Turkey’s purchase of a Russian defense system has clouded the lira’s outlook for most of the year, but it still managed to give the currency a shock when the threat was reiterated.

Wednesday 19, June 2019

(Bloomberg) --The lira sank as much as 1.5 per cent against the dollar after reports that the Trump administration is weighing three sanction packages to punish Turkey.

Concern over the implications of the Russian S-400 missile-defense deal has weighed on the lira for months and contributed to its 10 per cent loss this year, the biggest depreciation in emerging markets after Argentina’s peso.

The risk of sanctions may have already been priced into a large extent. While the premium option traders pay to sell the lira using one-month risk reversals has sunk from a high in March, the contracts are still up about 60 per cent since the start of the year.

TAGS : Turkish lira, Trump administration, Russian defense system, US sanctions

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