Turkish lira tumbles to record low

LONDON - The Turkish lira hit a record low on Monday on growing concerns around clashes between Armenian and Azeri forces.

The lira tumbled 1.5% to a low of 7.79 against the dollar, while Azerbaijan and Armenia sovereign dollar-denominated bonds fell as much as 3-4 cents.

"Fears are that Turkey gets dragged into another regional conflict," said Timothy Ash, EM sovereign strategist at BlueBay Asset Management, referring to the fighting over Nagorno-Karabakh, an enclave in Azerbaijan controlled by ethnic Armenians.

The lira, already among the worst performing European currencies this year, received a brief respite last week following a surprise move by the central bank to raise its key lending rate, but analysts said the average interest rate might not rise by much.

"Such temporary high interest rates, which attempt to purge out short lira positions, make little difference to the medium-term trend because speculative short positions against the lira are not really the reason behind its depreciation," said Tatha Ghose, FX analyst at Commerzbank.