As the toxic credit crisis wind blows East the Turkish Lira shows the first signs that the crunch may be approaching.

The Turkish Lira has dropped around 5% against the British Pound this evening. On Friday the Pound bought 2.30 YTL but tonight it bought 2.40 YTL and is still dropping. In the last 3 hours we have watched the Turkish currency lose 1 kurus to the Pound every hour.

The Turkish Lira has been a major miracle or some may even say a bubble currency since 2003. On the 3rd June 2003 1 British Pound bought 2.40 YTL. Tonight at 10:00pm Eastern European Summer Time 1 Pound bought exactly the same. In those 5 years the Turkish Lira has actually appreciated against just about every major currency in the world despite double digit inflation pushing domestic costs up over 60%.

But tonight’s changes are pretty dramatic given the current financial climate. The Lira normally follows the US Dollar against the Pound but tonight the two currencies parted company. This ‘decoupling’ shows the markets may be losing confidence in the Turkish currency even though interest rates are high?

So will the current fear in the global financial markets trigger a sell order that will weaken the Lira still further? Make sure you watch the currency markets closely over the next few days and see the outcome for yourself.