ISTANBUL: The Turkiye lira hit a new record low beyond 30 to the dollar on Thursday after losing more than a third of its value last year and more than 80% in the last five years, battered by a series of past interest rate cuts in the face of soaring inflation.
The lira was 0.2% weaker at 30.01 at 0845 GMT after touching an historic low of 30.015. So far this year it has shed 1.6%, even as analysts say its prospects have brightened due to an economic policy U-turn.
The currency is “still (a) key battle for (Finance Minister Mehmet) Simsek et al, and (a) test of the success of stabilisation,” said Timothy Ash, senior sovereign strategist at BlueBay Asset Management. “(It’s) still hard to anchor the lira with inflation at 65%,” he added.
Since President Tayyip Erdogan won re-election in May, authorities have abandoned the unorthodox low interest rate policy in favour of a sharp policy tightening.
Turkish lira marks new low after 36% drop this year
Turkiye annual inflation rate climbed to 64.77% in December, sustaining an upward trend that is expected to continue in coming months after a big rise in the minimum wage.
On Thursday, Central Bank Governor Hafize Gaye Erkan will deliver presentations to foreign investors on monetary policy, inflation and Turkish assets in New York.
In June, Erdogan appointed both Simsek and Erkan, who has since hiked rates by 3,400 basis points to 42.5% to rein in inflation and rebuild foreign exchange reserves.
Before the U-turn, foreign investors had largely abandoned Turkiye as Erdogan oversaw a largely easy-money policy and tightened authorities’ grip on foreign exchange, debt and credit markets, leaving them largely state managed.
The currency, which has suffered a series of crashes since 2018, weakened sharply last summer as authorities loosened their grip on it.
The depreciation slowed in the autumn but remained consistent.
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