AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)
Markets

Turkish lira grinds lower with no rate hike in sight

  • Concerns over Turkey's depleted FX reserves and sharply negative real interest rates have left the lira among the world's worst performers this year, down 22pc.
Published September 23, 2020

ISTANBUL: Turkey's currency continued its gradual descent to record lows on Wednesday, reflecting expectations the central bank would not hike rates to stem the slide as tensions with Greece and the threat of new EU sanctions appeared to ease.

Concerns over Turkey's depleted FX reserves and sharply negative real interest rates have left the lira among the world's worst performers this year, down 22pc.

At nearly 7.7 versus the dollar, it has shed half its value in less than three years.

The decline began when a currency crisis in 2018 set off a sharp recession that put an end to several boom years under President Tayyip Erdogan.

This year's coronavirus pandemic shrank the economy for the second time in as many years, leaving the central bank reluctant to remove monetary stimulus amid the recovery, especially given pressure from Erdogan for cheap credit.

Unlike the burst of selling in 2018, the lira in recent months has slowly burrowed to all-time lows, including passing 9 versus the euro this week.

It has dropped 15 of the last 17 sessions and was at 7.684 against the dollar at 0839 GMT.

The slide continued despite a Greek-Turkish deal to resume talks over competing claims to Mediterranean waters, a dispute that has raised the prospects of harsher European Union sanctions on Ankara.

HIGH STAKES DECISION

Economists polled by Reuters expect the central bank to hold its policy rate steady at 8.25pc at a meeting on Thursday. The one-week repo rate has held there since May after nearly a year of aggressive rate cuts.

But economists also expect the bank will lift a secondary rate, the late liquidity window, from 11.25pc to create more space for backdoor credit tightening that has lifted the average cost of funding to 10.61pc.

"Clearly the market wants to see the bank making efforts to turn the negative real interest rates back into positive rates with the help of key rate hikes," said Antje Praefcke at Commerzbank, adding there is risk of a sudden selloff.

Though the central bank expects inflation to dip, price rises have remained in double-digits, leaving real rates negative for lira depositors. In turn, Turks have ramped up FX and gold holdings to nearly $220 billion.

In part due to costly state interventions to slow the lira's slide, gross FX reserves at the central bank have fallen by nearly half this year.

Moody's and other analysts say that raises the risk of a balance-of-payments crisis.

Comments

Comments are closed.