A little respite for the lira.

Having plunged to a fresh all-time record low and endured some of its worst days of trading since the aftermath of a failed July coup, Turkey’s currency is steadying on Monday.

The lira is currently trading 0.2 per cent higher against the dollar at TRY3.19 at publication time.

Having endured a tumultuous run in the wake of a scotched military coup earlier in the summer, last week’s sell-off was sparked by the the arrest of the country’s popular Kurdish politicians, led by leader of opposition HDP Selahattin Demirtas.

But investors seem to be taking comfort in a decision by S&P Global Ratings to upgrade its outlook on the country to “stable” from “negative”, late on Friday.

S&P, which has attracted the ire of Turkey’s president Recep Tayyip Erdogan after it downgraded the country in July, said its revised outlook was driven by the resilience of the economy and efforts by the government to reduce its reliance on foreign funding.

“We recognise that the government has lowered the sensitivity of public debt levels to foreign exchange volatility by raising nearly all new financing in local currency”, said S&P.

But warning on the country’s febrile political tensions, the agency added:

Domestic tensions also remain following the detention, suspension, or dismissal of more than 100,000 individuals, largely in the judiciary, military, academic institutions, and the media, on suspicion of being involved in or supporting the attempted coup. To the extent that domestic tensions also raise questions about property rights, foreign direct investment’s role in financing Turkey’s large current account deficit is likely to remain well below the highs (3.6% of GDP in 2006) it reached during the ruling AKP party’s first term in office.

Read more: Erdogan’s purge becomes a naked power grab (FT editorial)

(Chart: Bloomberg.)

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