The Turkish lira weakened and bond yields rose in the OTC market late on Friday after news channels reported that the head of the Turkish armed forces had resigned, along with the heads of the ground, naval and air forces. The lira weakened as low as to 1.6996 against the dollar from an interbank close of 1.6805 earlier.
Turkish benchmark bond yields rose to 9 percent in the OTC market from an earlier close of 8.87 percent. The reason for the resignations of General Isik Kosaner and the three forces heads was not immediately clear. However, CNN Turk also quoted the prime minister's office as saying the generals were not resigning but going into retirement. State-run Anatolian news agency also reported Kosaner had retired.
"My sense is that this will be managed through (maybe some compromise around promotions).. with no tanks on the street... But this increases risk perceptions of Turkey and comes at a bad time given concern over the economy overheating," said RBS analyst Timothy Ash in a note. Tensions between the military and the government of Prime Minister Tayyip Erdogan have been high in recent years. Erdogan has diluted the military's power since he was elected in 2002 by reforms aimed at making Turkey fit for membership of the European Union.