FXStreet (Delhi) – Derek Halpenny, Research Analyst at MUFG, notes that the USD/TRY has been down over 5.0% already this morning in reaction to the larger than expected election victory for AK Party that brings to an end the political limbo that existed since the last election in June failed to create a working government. Key Quotes “Current reports on Bloomberg puts the seat total for AK Party at 316 out of the 550-seat parliament, taking about 49% of the vote. Crucially that 316 total falls short of the two-thirds majority required in order for the government to hold a referendum on giving of the office of the presidency greater power – a key goal of President Erdogan. The pro-Kurdish People’s Democratic Party (HDP), which did so well in June fell back but have still managed to get over the 10% threshold required for representation in parliament.” “While the reaction in the FX market is not surprising given how heavily the lira has been sold this year, the victory for Erdogan brings with it its own risks that are likely to resurface in the minds of investors as we move forward.” “An aggressive push for greater power by President Erdogan could unsettle investors and one of the fundamental vulnerabilities for the lira – Turkey’s large current account deficit and relatively high inflation – has not changed and leaves the lira vulnerable to external financing risks, especially with the Fed possibly moving in December. The AK Party is also well known for the overt political interference with central bank decision making that served to undermine the lira before. The strong gains we see this morning for the lira are unlikely to be repeated going forward.” For more information, read our latest forex news.