The Turkish lira has taken a tumble this week, following the downing of a Russian warplane. The jet, which was shot down on Tuesday near the Turkish-Syria border, was accused of violating Turkey’s airspace and, after ignoring several warnings, was shot out of the sky.
The incident frayed relationships between the two countries, a cconflict that has seen both Turkey’s currency decline and its stocks dive.
The lira plummeted almost 1 per cent against the dollar, compounding an already negative trend, with the currency down around 19 per cent against the strong US greenback this year so far. The Russian ruble also slipped 0.2 per cent against the dollar.
“The incident is undoubtedly significant and the markets have already reacted — the lira and the ruble, as well as both countries’ stock markets are down,” Liza Ermolenko, emerging markets economist at Capital Economics, told CNN .
The event occurs just after Turkey’s elections, which were won by the ruling AK party, a victory that was welcomed by estate agents as bringing back some stability and confidence to the Turkish market. With the economy already growing at a slower rate than five years ago, when it was rocketing upwards, the potential fallout of Russia’s response – tourism links have already been severed – could have ramifications for both the lira and investor demand.
“There is clearly a potentially for a much bigger reaction if political tensions between the two countries escalate sharply, much depends on what line officials take from here,” Ermolenko dded.