Cyprus Mail
Turkey

Turkish lira in new, steep drop

The lira lost more than 2% of its value on Monday to close at 5.83705 percent against the dollar

A fresh bout of geopolitical uncertainties weighed on emerging assets on Wednesday with Turkey’s currency taking a fresh dive as Asian investors joined the sell-off in the lira and markets bemoaned the lack of central bank action.

Having tumbled to record lows in recent weeks, Turkey’s currency suffered another steep drop, falling more than 5 percent against the dollar to hit a new record level of 4.9290, edging closer to the psychological level of 5 to the dollar.

Suffering from a gaping current account deficit, double-digit inflation and comments from President Tayyip Erdogan who has called himself the “enemy of interest rates”, the lira has been in the cross hairs of the emerging market sell-off, on track for its worst weekly and monthly performance in a decade.

Adding to the woes was a bout of selling by investors in Asia, which saw the lira tumble more than 6 percent against the yen.

Investors have also been unnerved by the lack of action by Turkey’s policy makers, despite news that Ankara’s economic team met at the start of the week to discuss potential measures, including possible central bank steps.

“Erdogan is saying he wants to take more control of monetary policy, which basically means he wants to see lower interest rates,” said Peter Kinsella, FX and rates strategist at Commonwealth Bank of Australia.

“The results of this is that markets are saying this place is turning into a bit of a basket case (and) we want to get out.”

Currencies elsewhere also suffered. South Africa’s rand , Russia’s rouble and Mexico’s peso all weakened 0.5 percent against a perky dollar.

Sentiment soured after U.S. President Donald Trump said he was not pleased with recent trade talks between the Washington and Beijing.

His comments sparked fresh concerns about trade relations between the world’s top two economies after investors had taken heart from comments made over the weekend by U.S. Treasury Secretary Steven Mnuchin that the “trade war” was “on hold”.

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