Turkish Lira Slides to Two-Month Low

Turkey's lira slumped to a two-month low against the dollar after officials said the prime minister would step aside, delivering a fresh reversal to a roaring 2016 emerging-markets rally.

The dollar was up 3.9% Wednesday afternoon at 2.9589 lira, its highest level since late February. The move came after officials said Turkish Prime Minister Ahmet Davutoglu was stepping down from his post and as head of the nation's ruling party.

Mr. Davutoglu has served as President Recep Tayyip Erdogan's handpicked successor, but the two have been jostling for power in recent months.

The lira's decline follows drops in several other emerging-market currencies, reflecting concerns about global growth and demand for raw materials, a key export of many developing countries.

The dollar has gained nearly 5% against the South African rand since May 2, while also strengthening against the Brazilian real, Russian ruble and Mexican peso.

The iShares MSCI Turkey exchange-traded fund, which holds shares of Turkish companies, fell more than 8.1%, its biggest one-day percentage drop since June 2013. The Vanguard FTSE Emerging Markets ETF fell 1.4%.

The emerging-market declines underscore the vulnerability of these assets following a sharp and largely unexpected rebound this year. Some investors are concerned that the gains have been fueled by a rally in oil and other commodities that would prove unsustainable. Many emerging markets, such as Turkey and Brazil, also face political instability.

Investors have also been reducing their bets on emerging markets ahead of U.S. jobs data due Friday. A strong report could bolster the case for the Federal Reserve to raise interest rates in coming months, a move that would likely boost the dollar against emerging-market currencies.

"Until we get a clearer direction on commodity prices and the Fed, it will be very difficult for investors to trade with conviction," said Nick Verdi, senior emerging market FX analyst at Standard Chartered.

Leslie Josephs and Dion Nissenbaum contributed to this article.

(END) Dow Jones Newswires

May 04, 2016 20:55 ET (00:55 GMT)

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