Loading...

Turkey lira crashes to record lows in new onslaught

Aug 10 2018 11:06
 Turkey's President Recep Tayyip Erdogan addresses

Turkey's President Recep Tayyip Erdogan addresses supporters in Eskisehir. (Murat Cetinmuhurdar, Presidential Press Service, Pool Photo via AP)

Related Articles

Rand nears R14/$ as dollar firms to 13-month peak

Rand strengthens in early trade

Lira plunges as Erdogan names son-in-law as treasury and finance minister

Rand runs as Turkey props up lira with massive emergency rate hike

 

Istanbul - Turkey's embattled lira on Friday hit new record lows against the US dollar and euro, losing 7% in value as strains with the US showed no sign of easing and fears grew over the exposure of European banks.

The lira was trading at 5.95 to the dollar, a loss in value on the day of 7.5%. However it had rallied partially after earlier crashing some 12% through the 6.0 level for the first time in history, trading at one point above 6.2.

The lira has now lost over a third of its value against both the dollar and the euro this year, with the currency battered by both concerns over domestic economic policy and the political situation.

Against the euro the lira fared no better Friday, losing 7.0% in value to trade at 6.8 to the euro.

Turkey remains at loggerheads with the US in one of the worst spats between the two NATO allies in years over the detention for the last two years of American pastor Andrew Brunson and a host of other issues.

Talks this week in Washington failed to resolve the impasse which has led both sides to slap sanctions on senior officials amid fears of graver measures to come.

Meanwhile, markets are deeply concerned over the direction of economic policy in Turkey where inflation has hit nearly 16% but with the central bank reluctant to raise rates in response.

President Recep Tayyip Erdogan after winning June 24 elections with revamped powers tightened his control over the nominally independent central bank and appointed his son-in-law Berat Albayrak to head a newly-empowered finance ministry.

'Accelerating speed'

Concerns were intensified Friday by a report in the Financial Times that the supervisory wing of the European Central Bank had over the last weeks began to look more closely at euro zone lenders' exposure to Turkey.

The report said that the situation is not yet seen as "critical" but Spain's BBVA, Italy's UniCredit and France's BNP Paribas are regarded as particularly exposed.

"Investors have been looking at the unfolding currency crisis in Turkey as a local difficulty, however the accelerating speed of the declines appears to be raising concerns about European banks exposure to the Turkish banking system," said Michael Hewson, chief market analyst at CMC Markets UK.

Albayrak, who formerly served as energy minister, is on Friday expected to announce what he has described as a "new economic model" for Turkey but markets remain sceptical.

Erdogan after the election is now in supreme control of economic policy in Turkey, analysts say, and has repeatedly alarmed markets with unorthodox theories that low interest rates can bring down inflation.

The president did nothing to reassure markets with comments overnight that the pressure on the lira was due to what he described as a "variety of campaigns" and appearing to play down the magnitude of the crisis.

"If they have dollars, we have our people, we have our right and we have Allah!" he said.

The plunge in the lira has featured remarkably little on Turkish television channels and newspapers -- most of which after recent ownership changes are loyal to the government -- with most media focusing instead on recent flooding by the Black Sea.

"Talk of a new economic model set to be announced today aren't doing much to quell investor concerns against a backdrop of a leader who appears to be invoking divine intervention and the people to push back against the rest of the world," said Hewson.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER


Follow Fin24 on Twitter and Facebook. 24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

turkey  |  lira  |  dollar  |  markets  |  currencies
NEXT ON FIN24X

 
 
 
 

Company Snapshot

#SAVINGSMONTH

Five of SA's top financial brains, including SARB governor Lesetja Kganyago share their best savings habits.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

I am not in a position to save because:

Previous results · Suggest a vote

Loading...