Turkish lira near record low after AKP fails to win majority

The Turkish lira traded near a record lows on June 8 as nervous investors reacted to the prospects of a minority or coalition government after the ruling Justice and Development Party (AKP) failed to win a majority in a parliamentary election, the Hurriyet Daily News reports.

The lira, already one of the worst performing emerging market currencies this year, hit a record low in out-of-hours trade on June 7, after results showed the AKP had taken just short of 41 percent of the vote.

The result is likely to leave it struggling to form a stable government for the first time since it came to power more than a decade ago.

“This is definitely the most uncertain of outcomes. It does open up the prospect of an early election and potentially there will be more friction in the AKP,” said Manik Narain, an emerging market strategist at UBS.

While investors were hoping for an outcome that ensured stability, most hoped there would be no landslide for the AKP, because it could have led to a constitutional change and handed more power to President Recep Tayyip Erdoğan, increasingly seen by critics as an authoritarian figure.

Some analysts said the June 7 setback could inflame Erdoğan’s authoritarian tendencies.

By 0454 GMT, the lira stood at 2.7770 to the dollar, tumbling from 2.6615 on June 5, but off a low of 2.799 that was hit in thin overnight trading when it was almost 5 percent down.