Source: Reuters
Turkish lira fell almost 3% against the dollar on Thursday, with investors getting concerned over the unorthodox policies by the state to spur growth and increase exports. USDTRY is currently up +2.04%.
- Surging inflation has seen the lira continue to fall against the dollar, with the government already having slashed the key rate by 500 basis points since September amid warnings.
- Thursday weaknesses in the lira is believed to be connected to a low volume of transactions caused by depressed demand for foreign currency by investors and a fall in the foreigners in the market.
- Although Turkey’s industrial production improved 11.4% in November from prior year, Jason Tuvey, an economist at Capital Economist, does not expect the strengths to continue, expecting the large falls in lira in December to filter through.
- The fall in the value of the lira happens at the back of a declining international reserves by the country’s central bank which hit $7.95 billion as of January 7, from $8.34 billion in the previous week. The reserves were at their lowest since 2002.
- The latest decline in the lira now erases gains the currency has made after the government intervened to protect the savers.
- Unorthodox rate cuts engineered by President Tayyip Erdogan saw the lira lose 44% last year against the dollar, pushing the inflation to a 19-year record in December.
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