Failed Turkey coup sees lira rebound, bonds tumble and shares fall

After a failed coup in Turkey on Friday, the lira rebounded from its biggest fall in eight years, Turkish bonds tumbled and shares in banks slumped.

The lira rose 1.73% to 0.333704 against the US dollar at 1612 BST, reversing a 4.6% decline on Friday.

“The Turkish lira rebounded during Monday's trading session after a horrible tumble on Friday,” said chief market analyst at Think Markets, Naeem Aslam.

“The drop in the currency was the largest since the financial crisis. If you benchmark the currency's performance against the dollar, it becomes evidently clear that Turkish Lira is still solidly higher against the dollar compared to the start of this year.

“The year to date performance has shown gains of nearly 4.1%. We expect the Turkish currency to continue to perform better and the bias may remain skewed towards the upside for some time to come.”

Before the attempted coup on Friday, the Borsa Istanbul index closed down 5.2%, the most in three years, and yields on 10-year Turkish government bonds jumped 60 basis points, the biggest hike since 2013. The Istanbul index of bank shares wilted in its biggest fall in over a year to 7%.

Turkey’s tourist industry, which was previously dealing with low demand due to ongoing security concerns, had felt a decline in stocks as investors fled from companies linked to tourism. Shares in Turkish Airlines fell 9% and TAV Havalimanlari, an airport operator, fell 11.8%.

Aslam added the failed coup affected the price of oil due to the geopolitical location of Turkey. Brent crude was down 1.5% to $46.89 per barrel and West Texas Intermediate fell 1.5% to $45.23 per barrel at 1712 BST.

“As for the price of black gold, crude oil has also shown signs of stability on the back of the improved situation in Turkey. Oil prices spiked late on Friday as the situation unfolded. Turkey's geographic location is very important for many oil routes, and any sort of political risk at this level threatens the oil supply.”

The attempted coup occurred on Friday evening when a faction of the Turkish armed forces tried to seize power. Turkish president Recep Tayyip Erdogan took to TV via Skype on an iPhone and urged people to rise up against the army.

Since the failed coup the government has detained 7,543 people including 6,038 soldiers. CNN Turk said that 50 high ranking civil servants were dismissed, which came as 8,000 police officers were removed of their posts. On Friday 232 people were killed, 208 of the civilians.

The Turkish government blames the coup on US based cleric, Fethullah Gulen and has asked for him to be extradited. The US government said they will if Turkey can provide any evidence linking him to the attempted coup. Gulen denies any involvement.

In the latest news, the deputy mayor of Istanbul's Sisli district was in critical condition after being shot in the head by an unknown assailant. The gunman had entered the office of deputy mayor Cemil Candas before shots were heard, Turkish broadcaster NTV reported.