ANKARA: Turkey’s lira slid against the dollar for a fourth straight session on Tuesday, posing a test for the central bank, as the currency approached lows hit in late December following a series of unorthodox interest rate cuts.
The emerging market currency (TL) weakened as far as 15.2290, bringing its losses since last Wednesday’s close to 3.3% against the greenback as markets worldwide retreated.
“The global strength of the dollar and the fact that the central bank policy is not kept in line with the rising inflation, increase the stress and pressure on the lira,” said Ipek Ozkardeskaya of Swissquote.
“The central bank is fighting a serious battle for the TL, but the cost of keeping the lira steady against a broadly stronger US dollar is increasing by the day,” she said.
A currency crisis late last year sent lira to a record low of 18.4 in late December, triggering state measures to underpin the lira through a scheme to protect lira deposits against depreciation and major forex market interventions.
Three bankers told Reuters on Tuesday the central bank and the BDDK regulator had asked banks to carry out foreign exchange transactions with corporate clients between 10 a.m. (0700 GMT) and 4 p.m. (1300 GMT) when the market is liquid.
Following a 44% slide in 2021, the lira dipped another 13% this year after a long period of stability was upset by concerns about economic fallout from the war in Ukraine, which sent Turkey’s already hefty energy import bill soaring.
After 500 basis points of cuts last year, the central bank has held its policy rate at 14% this year despite a leap in inflation to 70%. Policy is seen unlikely to change near term due to President Tayyip Erdogan’s pressure to keep rates low.
On Monday he announced low interest rates for housing loans in a bid to counter surging real estate prices.
Turkish lira hits weakest level since mid-December
Other data has also shown deterioration in economic circumstances with the current account deficit widening and jobless levels rising.
The unemployment rate rose to 11.5% in March from 11.1% a month earlier, statistical institute figures showed on Tuesday.
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