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Turkish lira slides to new low on inflation concerns

Against the euro, the currency also lost 0.5 percent in value to trade at 2.8334 lira to the single European currency

Published: Updated:

Turkish lira hit a new all-time low in value against the dollar on Tuesday, extending recent losses after accelerating inflation stoked concerns about the emerging economy.

The lira peaked at 2.5360, exceeding a previous low of 2.5275 after official data released Tuesday showed that annual inflation remained well above the central bank’s target in February.

Against the euro, the currency also lost 0.5 percent in value to trade at 2.8334 lira to the single European currency.

Data from the state statistics office showed that consumer prices were 0.71 percent higher in February than the month before, and annual inflation rose to 7.55 percent from 7.24 percent in January.

The annual rate was significantly above the central bank’s target of 5 percent.

Turkey’s currency has sunk to a series of historic lows during the past month as President Recep Tayyip Erdogan pressures the central bank to ease monetary policy to boost growth ahead of a parliamentary election in June.

On Monday Erdogan said defending the high interest rates is equal to “treason against this nation” and called on the central bank governor Erdem Basci to “shape up”.

The bank cut rates last month at what it called a “measured” pace, but has so far resisted aggressive rate cuts.

“We think the central bank ought to keep rates on hold in March and postpone the next rate cut to its April meeting...” economist Deniz Gokce of Finansbansks said.

Rumours in the past days that Basci and Deputy Prime Minister Ali Babacan -- the figures most trusted by the markets in the Turkish elite -- were set to resign and the stronger US currency also continue to weigh on sentiment.