Turkey country-specific exchange traded fund surged Monday on hopes that an American pastor facing terrorism charges could be released, raising hopes that the row between Ankara and Washington could be resolved.
The iShares MSCI Turkey ETF (NasdaqGM: TUR) advanced 4.4% Monday and was testing its short-term resistance at at the 50-day simple moving average.
Bolstering Turkey’s markets, the Turkish lira currency strengthened 2.5% to TRY6.1412 against the U.S. dollar. The lira has depreciated 38.5% year-to-date.
Turkish officials said that a Turkish judge could release Pastor Andrew Brunson when he appears in court on October 12 if the U.S. stops harassing the country to send the American back, the WSJ reports.
“It’s a possible outcome,” one official said.
U.S. officials said the Trump administration decided to ease off pressure Turkey amid concerns that the emerging market’s economic troubles could spread to other areas of the world.
Lira Was a Victim of Ankara, Washing D.C. Scuffle
The arrest and detention of Pastor Brunson triggered a retaliatory tariffs from Washington D.C. that pressured Turkey’s economy and dragged the lira currency down more than 40% against the U.S. dollar.
The sell-off in the lira raised concerns over the impact on the broader economy and particularly pressured Turkey’s banks, Reuters reports. Ratings agency Fitch said on Monday that Turkish banks’ foreign-currency liquidity risk heightened significantly amid volatility and currency weakness.
Turkey’s central bank has even hiked interest rates 6.25 percentage points to fight the rising inflation and support the weakening lira currency.
The Turkish government has also implemented a new economic program with lower growth targets as a response to the current market environment.
“If there is an attempt to improve relations with the U.S. then this would be the third important component that we need to expect this rebound in the lira to prove sustainable,” Piotr Matys, an emerging markets forex strategist at Rabobank, told Reuters. “The other two important components are already in place. The central bank raised interest rate decisively and this was followed by the new economy program, which includes more realistic macroeconomic assumptions.”
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