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Turkish Lira Erases Years Gains after Bond Rout

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ISTANBUL, Feb 26 Reuters The Turkish lira slid for a fifth straight day on Friday, hit by surging U.S. bond yields that helped erase all the years gains and set the stage for a potentially tougher battle against doubledigit inflation.

The lira fell as far as 7.4780 to the dollar and traded at 7.4450 by 1150 GMT, down 1.6 on the day and on track for its worst week since the height of a currency crisis in August 2018.

It had rallied strongly until midFebruary, outstripping its emerging market peers, after ending last year at 7.44, but a rout in global bond markets has spooked investors who have dumped EM currencies amid fears the losses could trigger distressed selling elsewhere.

Tenyear U.S. Treasury yields have jumped by the most this month since 2016.

A measure of investment risk, Turkeys fiveyear credit default swaps, or CDS,, rose by 10 basis points to 302 while volatility gauges hit midJanuary levels.

If the lira weakness continues despite some of the tightest monetary policy in the world, importreliant Turkey which imports virtually all its energy needs and many consumer products could see further upward pressure on inflation that is already at 15.

Piotr Matys, Rabobank senior strategist, said the selloff posed risks but was likely temporary.

There is going to be a strong pushback from major central banks to prevent yields from rising even further and that should stabilise the lira and other EM currencies, he said, adding he expects the lira to hit 6.50…

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