Turkey’s lira slides against dollar, down 23 per cent so far this year

The Turkish lira dropped 2 per cent against the dollar on Wednesday, bringing its losses to 23 per cent this year, after worries about a surge in inflation were fuelled by President Tayyip Erdogan’s pledge to keep cutting interest rates.

The lira weakened as far as 17.1 to the US currency, sliding from Tuesday’s close of 16.7650 towards the record low which it hit on Dec. 20 in a currency crisis triggered by a series of unorthodox interest rates cuts.

The currency has weakened in 12 of the last 14 trading sessions.

Speaking after a cabinet meeting on Monday, Erdogan said Turkey will not raise interest rates but rather continue cutting them in the face of high living costs.

The lira shed 44 per cent last year and has been the worst performer in emerging markets for several years running due largely to economic and monetary policy concerns under Erdogan’s government. Annual inflation soared to 73.5 per cent last month.

According to Refinitiv data, Turkey’s sovereign dollar bonds fell as much as 3.4 cents to their lowest level since March 7 as the slide in the lira accelerated.

Turkey five-year credit default swaps closed above 730 basis points on Tuesday, at levels last seen during the global financial crisis in 2008, data from S&P Global showed.