ANKARA: A six-day slide in Turkey’s lira has left traders predicting that authorities are now targeting a new level, as weak as 15.5 to the dollar, in a months-long effort to stabilise the exchange rate using its depleted reserves together with other measures.
Four Turkish traders said the central bank has likely set a new trading band of 15 to 15.5, allowing some depreciation in the face of a global flight to the dollar and to relieve pressure on the bank’s dwindling foreign reserves.
One bank trader said more depreciation would be allowed so that the lira remains between 15.5 and 16 to the dollar, which has risen as the US Federal Reserve raises interest rates to head off inflation, hurting emerging markets.
The lira has returned to lows last hit in late December, after a series of unorthodox interest rate cuts sparked a currency crisis that rattled the economy.
On Thursday, it weakened as far as 15.4295 and was at 15.382 as of 0832 GMT. It has lost more than 14% of its value this year, following a 44% plunge last year.
Given that the central bank’s reserves are actually negative when swaps are accounted for, traders said lira weakening was necessary if the bank plans to keep trying to steady the exchange rate as it has done since the December crisis.