Turkish Lira, Markets Slump After Moody's Cuts Rating to Junk Status
September 26 2016 - 07:00AM
Dow Jones News
ISTANBUL—The Turkish lira fell to a seven-week low against the
dollar and stocks tumbled Monday after Moody's Investors Service on
Friday downgraded Turkey's credit rating to junk status following a
review that began after the failed coup attempt in July.
The lira weakened about 1% on Monday to trade as low as 2.9990 a
dollar before rebounding slightly, and Turkey's main BIST-100 stock
index was down nearly 4%. Meanwhile, the yield on two-year
benchmark bond rose to 9% from its 8.68% close on Friday. Bond
yields rise as prices fall.
The downgrade to Ba1 from Baa3, which is investment-grade, may
prompt foreign investors, such as pension funds, to pull cash out
of the country, said Gokce Celik, chief economist at Finansbank in
Istanbul. "More importantly, it will lead to repricing of Turkish
lira-denominated assets, pushing the cost of external borrowing
higher while rendering the currency weaker."
After the Moody's cut, Fitch Ratings was the only agency keeping
Turkey at investment grade, with Standard & Poor's having
knocked the country deeper into junk status after the failed
attempt to overthrow President Recep Tayyip Erdogan.
"Moody's expects growth will slow over the coming years, as
constraints on the externally-funded, consumption-fueled economy
emerge, the reform agenda slows further and the investment climate
remains weak," the rating agency said in an emailed statement late
Friday, adding that it expected "this slow deterioration" to
continue for two to three years.
Turkish Economy Minister Nihat Zeybekci said Saturday that
Moody's decision didn't match up with Turkey's fundamental macro
dynamics. Deputy Prime Minister Mehmet Simsek tweeted on his
official Twitter account that the government's best response to
credit-rating firms would be to accelerate structural reforms and
maintain fiscal discipline.
Moody's placed Turkey's credit rating on review for downgrade on
July 18, just after the coup attempt.
Write to Yeliz Candemir at yeliz.candemir@wsj.com
(END) Dow Jones Newswires
September 26, 2016 06:45 ET (10:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Twitter (NYSE:TWTR)
Historical Stock Chart
From Feb 2024 to Mar 2024
Twitter (NYSE:TWTR)
Historical Stock Chart
From Mar 2023 to Mar 2024