Turkish Markets Shaken as Lira Stumbles Amid Political Turmoil

Turkey's banking index and lira faced significant downturns following the detention of Erdogan's political rival. Concerns over potential delays in interest rate cuts have heightened market volatility. A substantial FX sale by the central bank aims to stabilize the lira but raises uncertainties about future monetary policies.

On Thursday, Turkey's banking index nosedived over 8% amid escalating apprehension that the central bank might halt forthcoming interest rate reductions. This follows a sharp tumble of the lira and the arrest of key political figure Ekrem Imamoglu, shaking investor confidence.

The benchmark BIST-100 stock index experienced a volatile opening, eventually falling 1.01%. The banking index initially dropped 1.68% early in the day, exacerbating to over 8% declines as market tension heightened.

In efforts to curb the lira's crash, authorities reportedly executed a massive FX transaction, potentially exceeding $10 billion. While the lira reeled from a historic low, traders and analysts are now pondering the future of Turkey's monetary easing, with some expecting an implicit rate hike if foreign exchange demand persists.

(With inputs from agencies.)