ISTANBUL: The Turkish lira weakened against the dollar on Wednesday as the kidnapping of 18 Turkish workers in Baghdad added to Turkey's security concerns, while a negative emerging market backdrop also weighed on sentiment.
The lira has lost some 20 percent of its value against the dollar this year, hit by political uncertainty after an inconclusive June election and renewed conflict with Kurdish militants in the southeast.
Diplomats have said Turkey could suffer reprisals after launching air strikes against Islamic State in neighbouring Syria, and on Wednesday gunmen seized construction workers from a sports stadium in Baghdad.
"US markets are looking bad and globally there is tension in markets.
Coupled with this, what is happening in Iraq has again raised security concerns," one banker said. The lira stood at 2.9462 against the dollar by 1002 GMT, down from 2.9243 on Tuesday, but off a morning low of 2.9525.
Emerging equities fell for the third day running on Wednesday, approaching six-year lows on deepening concerns about global growth, as oil price weakness fuelled another drop in the Russian rouble.
Data this week showed manufacturing and exports contracted in several emerging economies and the Turkish PMI fell to 49.3 in August, data showed on Tuesday.
Reinforcing the picture of a slowdown in economic activity, figures on Wednesday showed that while Turkey's trade deficit narrowed sharply in August, this was driven by an 18.2 percent slide in imports while exports fell slightly.
Turkish shares were steady with the main BIST 100 index ending the morning up 0.06 percent at 73,613.74 points. The benchmark 10-year government bond yield rose to 10.28 percent from 10.21 percent on Tuesday.
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