The lira rose sharply against the dollar after the election victory of the Justice and Development Party (AK Party) on Sunday.
Traders reacted positively to the news that the AK Party would be able to form a government without recourse to a coalition with rival parties.
The Turkish lira was trading at about 2.88 to the dollar on Friday, when currency markets closed, but the lira rebounded to about 2.83 on Monday. Political uncertainty had caused the Turkish lira to fall to about 3 to the dollar before the elections.
Polls had led traders to expect the AK Party to fail to win an outright majority of seats in parliament, as it had in the previous election in June. Negotiations for a coalition government after the June elections proved fruitless, leading the president to call snap elections on Nov. 1.
"The Turkish lira could now see one of its strongest periods, moving closer to two per dollar down from three," wrote trader Steve Walker in a note published on Monday morning. "This election will end Turkey's period of transition, and should lead to a marked strengthening of the country's economy."
Futures pointed to a flat open on Borsa Istanbul on Monday morning.
According to the initial results of Sunday’s election, the Justice and Development (AK) Party secured 49.29 percent of the vote -- a higher proportion than any of the predictions by opinion polls -- winning 314 seats at the 550-seat Grand National Assembly.
The vote had been called following June's inconclusive general election that saw no party win a majority and coalition talks fail to produce an administration.
By Andrew Jay Rosenbaum
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