Turkish lira hits yet another record low, pushing past 8 to the dollar amid France row

[Demsaydemsay]

Turkey’s sliding currency hit a new low on Tuesday, trading at a record 8.2 lira to the dollar late afternoon in London amid investor displeasure over the central bank’s stubbornness on interest rates and growing acrimony between Turkey and France.

“The market clearly not happy with CBRT’s approach on the rates side,” W. Brad Betchel, global head of foreign exchange at Jefferies, wrote in a note Tuesday referring to Turkey’s central bank.

The lira’s value has fallen by 20% year-to-date and halved since the end of 2017. At the start of 2018, a dollar bought just 3.77 lira; now analysts predict that figure will hit 8.5 or even 9.

The recent slide comes after the central bank last week declined to raise interest rates, surprising investors, and instead opted to hike its late liquidity lending rate to 14.75%. It announced its intention to focus on liquidity measures “until (the) inflation outlook displays a significant improvement,” despite pressure to raise its rates in order to counter its double-digit inflation. The benchmark interest rate for Turkey currently stands at 10.25%.

“It would have been difficult for the (central bank) to admit more clearly that it is not willing to take any measures to stabilize the inflation outlook and the Turkish lira against political pressure,” analysts at Commerzbank wrote in a note Tuesday.

Erdogan has previously defended his economic record and in September called interest rates the “tools of his enemies.” Over the summer he downplayed the lira’s slide, calling it “temporary.”

https://www.cnbc.com/2020/10/27/turkish ... -row-.html