The lira extended its drop to a record low against the dollar and stocks slid after the Turkish central bank’s first unscheduled intevention in more than two years failed to stem the currency’s decline yesterday.
Emerging-market stocks advanced, led by the biggest rally in Turkey’s benchmark index in more than three months, amid speculation political tension in the country may ease. The lira strengthened, while Russia’s ruble declined.
The Turkish central bank’s pledge to keep interest rates unchanged through year-end is leaving lira debt vulnerable to renewed selling as nations from Indonesia to India raise borrowing costs to shore up their markets.
The lira headed for a record low against the dollar as measures taken by the central bank failed to allay concern Turkey’s economy will be hurt if its neighbor Syria is attacked in a U.S.-led military strike. Bonds fell.
Turkey bonds recouped all of their losses incurred after Syria shot down a Turkish warplane four days ago and the lira strengthened as the government said it would prefer diplomacy to war, reducing risk aversion.