Turkish lira rebounds from record low despite policy worries

ISTANBUL: Turkey’s lira recovered as much as 7% on Wednesday from a historic slide to record lows a day earlier triggered by President Tayyip Erdogan’s defence of rate cuts, but volatility and steep price rises still worried consumers and investors.

The currency hit new all-time lows against the dollar in 11 consecutive sessions before Wednesday, losing as much as 45% of its value this year, with around half of those losses occurring since the start of last week.

However, the lira strengthened as far as 11.6 to the U.S. currency on Wednesday afternoon before easing to 12.00 by 1318 GMT, still 38% weaker than at the end of last year.

Bankers said liquidity had virtually dried up with moves to Tuesday’s all-time low of 13.45 driven by panic dollar buying.

Many Turks, already grappling with inflation of around 20%, fear price rises will accelerate. Opposition politicians have accused Erdogan of dragging the country into crisis. Retailers too are struggling with the turmoil, with some websites stopping sales of electronic products on Wednesday.

A sales representative at an Istanbul Apple store said people were thinking of electronics as an investment as much as items to use. “It is pretty surreal with the economy and all, but people see it as a store of value,” the representative said. Despite Erdogan defending the central bank’s monetary policy and vowing to win his “economic war of independence”, there is widespread criticism from those calling for action to reverse the slide in the currency, including from top economists.

There has been no sign of any intervention to boost the currency. The central bank said on Tuesday it could only do so under certain conditions in “excessive volatility”.

Erdogan has pressured the central bank to move to an aggressive easing cycle with the goal of boosting exports, investment and jobs.

But many economists have described the rate cuts as reckless and opposition politicians called for immediate elections. Turks told Reuters the dizzying currency collapse was upending their household budgets and plans for the future.