Turkey lira hits new historic lows
Turkey's currency today took a fresh pounding to hit new historic lows, as emergency measures by the central bank failed to impress markets rattled by terror attacks and political instability.
The lira has lost over 10 per cent in value against the American dollar since the start of this year alone with President Recep Tayyip Erdogan's plan for a presidential system, currently debated by parliament, unnerving investors.
The lira lost 2.4 per cent against the dollar to trade at 3.88 to the greenback, having earlier reached a new historic low in value of 3.90.
Against the euro, the lira crashed through the 4.0 ceiling for the first time in history to trade at 4.09 to the euro, a loss of 2.0 per cent in value on the day.
Economists have expressed alarm that the pressure could continue due to concerns over security and political stability, as Erdogan drives for a presidential system under a new constitution expected to lead to a referendum in early spring.
Meanwhile the slew of terror attacks blamed on Kurdish militants and jihadists have caused major jitters on markets and also undermined the key tourism industry.
The central bank yesterday sought to halt the slide by relaxing foreign exchange rules to inject 1.5 billion dollars into the market.
But the move failed to halt the bloodletting on the markets with analysts saying more was needed.
"Directionally, we see these measures as supportive for the currency," economists at Finansbank said in a note to clients.
But they added: "In terms of magnitude, however, it is a different story. We think the impact on currency is likely be limited."
Despite the turbulence that has seen the lira lose 25 percent against the dollar in the last three months alone, Turkish officials remained unruffled.
"The exchange rate is not more important than the current account, deficit, employment, growth or inflation," Turkey's Economy Minister Nihat Zeybekci was quoted as saying by the Hurriyet daily.
Cemil Ertem, a senior advisor to Erdogan, blamed a conspiracy from abroad to encourage speculation and devalue the lira during the constitution debate.
"There's an operation going on to quickly devalue the Turkish lira. This is not a conspiracy theory. It's a very clear reality," he said.
Hurriyet's economic columnist Ugur Gurses said the central bank was powerless to make any major change given the political background and could only act as a "fire brigade".
"The turbulence experienced in the Turkish financial markets is completely fuelled by the political field," he wrote.
Attention is now focused on the central bank's next policy meeting on January 24 where markets will be a seeking a hefty hike to support the lira, while Erdogan is looking to push for measures to help growth.