Turkish lira firms as markets await Erdogan's new economic team

ISTANBUL: The Turkish lira strengthened against the dollar on Monday, lifted by increased risk appetite, while investors awaited to see President Tayyip Erdogan's new economic team as the country moves into a new political system.

Turkey shifts to an all-powerful executive presidency on Monday, ending its decades-long parliamentary democracy and Erdogan will serve as its first President, after winning more than 52 percent of votes in June 24 elections.

Analysts say Turkey needs to restore investor confidence in the lira, and appointing market-friendly members in the cabinet is key for the country's future economy management and policies.

Inan Demir, senior emerging economist at Nomura International, said the lira was mostly driven by stronger risk appetite and the attractive carry trade on the currency. But the cabinet appointments were going to be determinant.

"If we see market-friendly names being appointed (to the cabinet) we might see an even more positive response for the lira and the opposite is true as well," he said.

Erdogan said on Friday that he would appoint ministers from outside parliament, as well as people not from his AK Party. Investors are keen to see Mehmet Simsek, currently deputy prime minister viewed as a market-friendly figure in the government, continue to be at the helm of the economy.

"For the cabinet appointments in the past several years, the most important issue has been the presence of the current deputy prime minister Mehmet Simsek in the cabinet..... The markets would be relieved and happy if they see Simsek appointed head of this ministry," Demir said.

The lira is down nearly 17 percent this year on investors' concerns over the ability of the central bank to rein in persistent double-digit inflation with Erdogan calling for lower interest rates.

In May, he said he would exercise greater control over monetary policy once re-elected, which sent the lira to a historical low of 4.9290 against the dollar.

The lira stood at 4.5510 against the dollar at 0819 GMT, strengthening half a percent from Friday's close of 4.5745.

In a speech on Saturday, Erdogan said he would tackle high interest rates, inflation and a wide current account deficit. He also promised to take Turkey "much further" by solving the economy's structural problems.

The main index BIST100 was up 1.25 percent percent to 99,964.20 points.