The Turkish lira weakened against the dollar on Thursday October 10th, as investors fretted about negative international reaction to a ground offensive launched by Turkish forces against a Kurdish militia in northeast Syria, Reuters reported.
The lira weakened to 5.88 against the dollar from a close of 5.8740 a day earlier. It weakened 0.5% on Wednesday October 9th, when the operation began with air strikes.
Turkish forces were attacking a Kurdish militia in Syria, which Ankara regards as a terrorist organisation, beating them with air strikes and artillery before starting a cross-border ground operation.
The lira has come under pressure since the White House announced the withdrawal of some US troops from the Syrian region near Turkey’s border.
Turkey’s main stock exchange index, BIST100, was down 0.64%. The Turkish banking index traded down 0.77%.
Investors are concerned about proposed US sanctions on Turkey following the beginning of the assault, including targeting Ankara's military transactions and US assets of President Tayyip Erdogan.
"We can say that the current pricing in the market is more focused on geopolitical concerns over international reactions to the Syria operation," a senior banker said.
The market pressure could continue until President Erdogan and US President Donald Trump meet in November, the banker said.
The cost of insuring exposure to Turkey's sovereign debt climbed to its highest in a month on Thursday October 10th, after Turkish troops launched the ground operation in northeast Syria.
Turkey's five-year credit default swaps (CDS) rose to 396 basis points (bps), up from 388 bps at the end of trading on Wednesday October 9th, according to IHS Markit data.
Turkish dollar bonds also fell for a fourth straight day on Thursday October 10th, with the 2045 issue dropping 0.86 cents to its lowest in three weeks, Tradeweb data showed.
Turkish commandos pushed deeper into Syrian territory, east of the Euphrates River on the second day of their offensive against Kurdish militia.