ISTANBUL: The Turkish lira reached five-month lows after minutes of the Federal Reserve's last meeting led markets to price in an earlier increase in U.S. interest rates, making emerging-market assets less attractive.
The Fed hinted that a surprisingly strong recovery in the U.S. jobs market may lead it to raise interest rates earlier than it had been expecting. Turkey is susceptible to changes in global liquidity, because it relies on foreign capital to finance its current account deficit.
Investors will also monitor a meeting by the central executive board of Turkey's ruling AK Party later on Thursday, which is expected to decide on a new prime minister and new party head. Prime Minister Tayyip Erdogan will step down as party leader when he is inaugurated on Aug. 28 as president.
Outgoing President Abdullah Gul said on Tuesday that Foreign Minister Ahmet Davutoglu was likely to take over as chairman of the party and become the next prime minister.
The lira depreciated to 2.1880 against the dollar earlier, its lowest level since March 28, before local elections. It was trading at 2.1805 by 0716 GMT.
"Losses in emerging-market currencies gained pace after Fed minutes, and the lira was the worst performing among 24 currencies we track," said Garanti Securities strategist Tufan Comert.
"Of course, the lira's only problem is not the Fed. It has been depreciating since the beginning of the month due to domestic political tension. Uncertainty over the economy management will be reduced after AK Party meeting today in which they will decide on a new prime minister and party head."
Istanbul's main share index was down 0.22 percent at 78,701.33 points, underperforming the broader emerging markets index, which was down 0.66 percent.
Turkey's benchmark two-year bond yield rose to 9.36 percent from 9.32 percent a day before.
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