Turkish lira reaches weakest level since mid-December

The Turkish lira fell 0.8% on Monday, surpassing $ 15 for the first time since December last year when the currency crisis hit record lows after a series of unorthodox interest rate cuts.

Emerging market currencies reached a low of 15.07, surpassing the levels reached in March, which was hit by concerns about the war in Ukraine. The loss was 12% weaker than at the end of 2021. Last year it decreased by 44%.

After the 500 basis point cut last year, the Bank of Turkey (CBRT) maintained its policy rate at 14% in April for the fourth straight month. Pressure from President Tayyip Erdogan for a simple policy suggests that change is not imminent.

“Despite the runaway inflation, CBRT is unlikely to change its policy stance. We expect TRY to gradually weaken,” Societe Generale said in a memo.

On December 20, last year, Lira set a record 18.4 and began state measures to support Lira through massive foreign exchange market intervention and a scheme to protect Lira deposits from depreciation.

The currency was relatively stable for most of the year, but slipped in March when Russia invaded Ukraine. Western sanctions on Russia have soared energy prices and pushed up Turkey’s already expensive import bill.

Last year’s crisis was triggered by an aggressive easing cycle sought by Prime Minister Erdogan despite rising inflation. It pushed inflation to 70% in April and widened the current account deficit, along with the effects of the war.

This could upset Prime Minister Erdogan’s economic plans to achieve a current account surplus, maintain low interest rates and promote growth, exports and employment.

“We see TRY’s recent stability inconsistent with its (balance of payments) position deterioration and depreciation pressure elsewhere,” Wall Street bank JP Morgan said at the end of last week. .. [Reuters] Turkish lira reaches weakest level since mid-December

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