Turkish lira weakens

Turkey's lira declined some 0.5% against the dollar on Monday, ahead of an expected rate cut from the central bank this week and as tensions fester over Ankara's purchase of Russian defence equipment and disputes in the eastern Mediterranean.

The lira traded at 5.7995 against the dollar at 1252 GMT, weakening some 0.5% from Friday's close of 5.7715. Earlier, it reached 5.8060, its weakest level since October 23. The currency has declined nearly 9% this year mainly over concerns of deteriorating ties between Ankara and Washington.

Turkey has faced potential US sanctions over its purchase of the Russian S-400 missile defence system and media reports last week quoted officials saying Ankara and Moscow were working on a new deal for the systems.

Ankara has also disagreed with Athens over ownership of natural resources in the eastern Mediterranean. Turkey and Libya's internationally recognised government signed an agreement last month on maritime boundaries which led Greece to expel the Libyan ambassador to Athens. The dispute has also created a rift between Ankara and its other European allies.

This week's rate decisions, mainly the Turkish central bank meeting on Thursday, will determine the direction of the lira, said a forex trader who requested anonymity. The US Federal Reserve and European Central Bank are also holding monetary policy meetings this week.

"We can summarise the factors that are increasing the selling pressure on the lira as the tensions rising in the Mediterranean, news that Russia and Turkey could be approaching a new S-400 deal... and the central bank's rate cut getting closer," the trader said.