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.
Turkish yields rose to a two-year high and the lira weakened as inflation in Istanbul accelerated the most in a year and Greece’s plan to hold a referendum on its bailout prompted investors to sell riskier assets.