Turkish lira, stocks strengthen after U.S. and Iran step back from conflict

The Turkish lira rose against the dollar on Thursday after the United States and Iran stepped back from further hostilities in the Middle East.

The lira strengthened by 0.3 percent to 5.89 per dollar at 12:23 p.m. in Istanbul, climbing for a second day. The BIST 100 main index of stocks increased 2.6 percent to 115,835 points.

U.S. President Trump sought to de-escalate hostilities with Iran on Wednesday, signalling no new military strikes in response to an Iranian missile attack on bases in Iraq housing U.S. and allied troops that resulted in no casualties. Iranian Foreign Minister Mohammad Javad Zarif said the strikes concluded Tehran’s response to the U.S. air strike that killed Iranian commander Qassem Soleimani in Iraq last week.

Turkey’s lira had weakened to almost 6 per dollar earlier in the week, prompting state-run banks to intervene in the market by buying dollars. Turkey borders both Iran and Iraq. The lira is among the most vulnerable assets in emerging markets after a currency crisis struck in the summer of 2018, sending the economy into a tailspin.

Turkey’s banking index led gains for the stock market, jumping 3.9 percent to 164,196 points. Garanti BBVA, one of the country’s biggest listed lenders, surged 4.1 percent to 11.56 liras.

Turkish President Recep Tayyip Erdoğan said on Wednesday that Turkey would do everything in its power to prevent a regional conflict. He spoke in Istanbul alongside Russian President Vladimir Putin during a ceremony to open a pipeline carrying Russian gas to Europe.

"Nobody has the right to draw the entire region, starting with Iraq, into a ring of fire,’’ state-run Anadolu news agency quoted Erdoğan as saying.