ISTANBUL: Turkey's lira fell to its weakest level against the dollar in nearly eight months on Monday after strong U.S. data stirred fears in emerging markets of tighter monetary policy in the world's biggest economy.
An increase in U.S. borrowing costs will make high-yielding but riskier emerging markets less attractive for investors. Turkey is especially exposed to global liquidity conditions because of its large current account deficit, which is driven by energy imports and financed by foreign capital inflows.
The lira slipped to 2.2763 against the dollar at 0801 GMT, its weakest since Feb. 4, from 2.2635 late on Friday.
The U.S. Commerce Department reported, after Turkish markets had closed on Friday, that the U.S. economy had grown at its fastest pace in 2-1/2 years in the second quarter, boosting the dollar in anticipation of a rate hike.
"The vulnerabilities of Turkey's economy are pushing the (lira) currency further down as the picture gets blurry for emerging markets - a mood that started after September's Fed meeting and intensified further on Friday following strong U.S. growth," said Gokce Celik, analyst at Finansbank.
"The impact of dollar strength may increase further if September's non-farm payrolls come in stronger than expected. A scheduled Fitch review on Friday may also add pressure on the lira."
The ratings agency assigned in April a BBB- rating for Turkey with a stable outlook. Earlier this month it warned of growing political pressure to cut interest rates despite higher inflation in the run-up to Turkey's parliamentary election next June.
A modest rise in Turkish consumer confidence did little to boost local markets and at 74 points, it remained well below the 100-point optimism mark.
As investors moved out of emerging market assets, the benchmark 10-year government bond yield rose above 10 percent for the first time since April 25 to 10.04 percent from 9.79 percent on Friday.
Istanbul's main share index fell 0.07 percent to 74,583 points in Monday morning trade but outperformed broader emerging markets which were down 0.61 percent.
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