The Turkish lira soared nearly 2.8 percent Monday to its strongest level since April after President Tayyip Erdoğan said he heard from U.S. President Donald Trump there would be no sanctions over Turkey's purchase of Russian S-400 defense systems. On track for its biggest daily jump in weeks, the lira in the afternoon stood at 5.63 against the dollar, its best reading since April 8. The currency closed at 5.7875 on Friday, before Erdoğan met Trump at the G20 summit in Japan at the weekend. Turkish stocks also gained more than 3 percent in yesterday's trading and Borsa Istanbul's benchmark index BIST 100 hit 99,756 points at 05:35 p.m.
Turkey's 5-year CDS slipped 14 bps over a 5-year period to 384 bps, its lowest since early April, according to IHS Markit data.
NATO allies Turkey and the U.S. have been at odds over the S-400s purchase, with Washington warning of U.S. sanctions if the delivery took place. The dispute has been a source of concern for investors, putting pressure on the lira.
The U.S. says the S-400s will compromise its Lockheed Martin Corp F-35 fighter jets, of which Turkey is a producer and buyer. Washington has also formally started the process of expelling Turkey from the F-35 program, halting the training of Turkish pilots in the U.S.
But Turkey has emphasized that the S-400s would not be integrated into NATO operability and would not pose a threat to the alliance. It has also repeatedly said it was ready to discuss Washington's concerns. It proposed forming a joint working group with Washington to assess whether the S-400s would pose a threat to NATO; however, the U.S. has not taken any steps to form the technical team.
But on Saturday, Erdoğan said Trump had told him there would be no sanctions over the Russian deal, after Trump said Turkey had been treated unfairly over the move. In an interview with journalists in Osaka, the president told reporters that the first delivery of the S-400s would take place within 10 days and that he believed the dispute would be overcome "without a problem."