The dollar crosses the threshold of eight Turkish lira for the first time in history
The currency is being pulled off with major worries and record investors are fleeing
Tuesday – 10 Rabi Al-Awal 1442 AH – 27 October 2020 AD number no. [
The Turkish currency fell to its lowest level ever by more than 8 lire to the dollar, affected by outstanding pressure (AFP)
Istanbul: «Middle East»
The Turkish currency fell to its lowest level ever, hitting 8.05 against the dollar on Monday, as a result of investors’ concerns over the central bank’s decision to keep its key interest rate unchanged last week and geopolitical concerns.
Tensions in relations with the United States, the dispute with France, the dispute between Turkey and Greece over maritime rights and the fighting in Nagorno Karabakh caused investor concern.
The lira fell more than one per cent from Friday’s closing level of 7.9650 pounds, the worst development in emerging markets, continuing the wave of losses it has suffered over the past nine weeks, the longest since 1999. The currency has lost 26 percent this year and more. Of half of its value since the end of 2017.
Turkey is spending its foreign exchange reserves faster than any other major developing economy in an effort to support the currency. Foreign investors also sold the equivalent of $ 13.3 billion in Turkish equities and bonds this year, the highest level since at least 2005.
Bloomberg reported that the continued decline of the Turkish lira against the dollar reinforces doubts about the Turkish central bank’s performance and its efforts to support the local currency in a time of escalating geopolitical tensions.
The central bank kept the reference rate at 10.25 per cent and raised the delayed liquidity window to 14.75 per cent, saying that a broad tightening of financial conditions had already taken place following measures to limit inflation risks.
The central bank was expected to raise the interest rate by 175 basis points to 12 per cent last Thursday in light of the weak development of the pound, which led to concerns about high inflation and the sharp decline in foreign exchange reserves.
Piotr Mattis, an emerging market analyst at Rabobank (based in London), said markets were deeply disappointed with the outcome of last week’s Turkish central meeting, in addition to raising concerns about US sanctions and geopolitical tensions.
“The escalation of geopolitical tensions with the United States and the European Union is a new source of pressure that is weakening the lira,” a foreign exchange trader at a local bank told Reuters. Other factors are doubts about the reliability of monetary policy and the suitability of the lira’s return.
Bloomberg quoted Ghassan Koman, head of the Middle East and North Africa Research Division at the MUFG Banking Group: With a careful and consistent policy. ”
The agency added that in addition to the registered deterioration in the development of the local currency, foreign investors’ interest in Turkish assets is also declining due to a number of geopolitical risks, and points out that Recep Tayyip Erdogan’s regime is threatened with possible US sanctions due to the purchase of the Russian missile system. and the Turkish government is involved in disputes in the region. Eastern Mediterranean and Caucasus.
In the midst of the currency crisis, Turkey said it had decided to extend the investigation period carried out by its ship Oroch President in a disputed area in the eastern Mediterranean until November 4, and Greece promised on Sunday to lodge a complaint against what it described as an “illegal” features”. Turkey said the Greek accusation was “baseless”.