Monday 24 June 2019 12:40 pm

Turkish lira rallies as President Erdogan's AK Party concedes Istanbul defeat

The Turkish lira and other assets have climbed in value after the country’s opposition beat President Recep Tayyip Erdogan’s ruling AK Party (AKP) in the re-run Istanbul mayoral election on Sunday.

Read more: Turkish lira continues its falls as country’s reserves dwindle

The Turkish lira had climbed 0.5 per cent against the dollar shortly before 1pm UK time, meaning one dollar bought 5.761 lira. Turkey’s Borsa Istanbul 100 stock index had climbed one per cent.

Main opposition candidate Ekre Imamoglu of the Republican People’s Party (CHP) won 54 per cent of the vote, a figure far higher than he originally received in March.

The original election had to be re-run after the AKP said there had been voting irregularities.

The acceptance of the Istanbul result by Erdogan’s party has calmed investors’ nerves. Turkish dollar-denominated bonds rose following the result, driving yields down.

Maya Senussi, senior economist for the Middle East at Oxford Economics, said: “One of the issues that we’ve been flagging as adding to the element of uncertainty was the domestic elections issue – that’s done now.”

However, she warned against “reading too much into it”. She said: “The focus will quickly shift back to the issues that are still hanging over Turkey, especially the issue with sanctions.”

Tensions between the US and Turkey of the sort that inflamed 2018’s lira crisis have long threatened to flare up once again.

This has dragged down the Turkish lira along with uncertainty surrounding the elections and delayed economic reform.

The Trump administration has said it will cancel Turkey’s purchase of US fighter jets should it buy a Russian missile defence system.

Turkey plans to go ahead with the Russian purchase, which could provoke US sanctions on the country as soon as July.

Yet for the time being, investors have been cheered by the removal of electoral uncertainty.

Erdogan congratulated Imamoglu, who beat the AKP candidate by more than 700,000 votes.

Read more: Lira falls as tensions with US mount over fighter jets

Fund manager Alberto Gallo said the result showed “financial stress in Turkey has not only been not matter of ability to grow, but willingness to provide clarity around democratic institution”.