Turkish lira nosedives to lowest since 2021 currency crises
The stockpile shrank by $4.8b in the seven days ended May 13, the most this year
Istanbul: The Turkish lira weakened to a five-month low against the US dollar as monetary policy remains far too loose to curb the fastest pace of inflation in 20 years.
The lira slipped as much as 0.7 per cent to 16.04 per dollar on Tuesday, the lowest level since a currency crisis late last year. Consumer prices rose an annual 70 per cent in April, well above the bank’s policy rate of 14 per cent.
The losses come even as policymakers introduced an FX-linked savings program and backdoor intervention to prevent the currency from sinking further after it went into freefall last year. The lira weakened from less than 10 per dollar in mid-November to an all-time low of 18.36 on December 20.
The widening current-account deficit amid spiraling energy costs is also putting pressure on the currency and draining the nation’s foreign currency buffers. The stockpile shrank by $4.8 billion in the seven days ended May 13, the most this year.
The drop in reserves “denotes growing difficulties in keeping the lira stable amid intensifying headwinds,” Cristian Maggio, head of portfolio strategy at TD Securities in London, wrote in a May 20 note to clients.
Turkey’s central bank will hold a rates meeting on Thursday, and economists predict that it will hold the key policy one-week repo rate at 14 per cent after pushing through 500 basis points of cuts last year.