Turkish lira tumbles to new low against dollar
Weeks before legislative elections, Turkey's lira tumbled to a new low against the dollar
Turkey's embattled lira on Wednesday tumbled to a new low against the dollar, creating a headache for the ruling party just weeks before legislative elections.
The lira smashed above the psychologically important level of 2.7 to the dollar for the first time and expanded its losses throughout the day.
In evening trade, it was trading at 2.728 to the dollar, a loss in value of 1.50 percent on the day.
The lira is being pressured by the possibility of the US Federal Reserve raising rates and but also domestic jitters over the coherency of Turkish economic policy under President Recep Tayyip Erdogan.
Markets have been spooked by fears that Deputy Prime Minister Ali Babacan, seen as the guarantor of sensible economic policy under the ruling Justice and Development Party (AKP), could be jettisoned from the cabinet after the June 7 elections.
The central bank on Tuesday took the hugely unusual step of publishing the agenda of its next monetary policy meeting on April 22 which will include measures to support the lira, including a cut in foreign exchange deposit lending rates.
This announcement initially helped support the lira on Tuesday but these gains were wiped out in early trading Wednesday.
Investors are particularly concerned over talk of figures will little experience of in economic policymaking entering the government after June 7, such as Erdogan's son-in-law Berat Albayrak and or his advisor Yigit Bulut.
The president has for months been locked in a bitter struggle with central bank chief Erdem Basci, who Erdogan wants to slash interest rates to boost growth.
The lira has lost almost 16 percent in value over the last three months against the dollar, in a major worry for the government ahead of the polls.
"Given the political uncertainties regarding the outcome of the elections, we think that the Turkish lira will remain weak and trade in a range of 2.60-2.80" to the dollar, said Ozgur Altug at BGC Partners in Istanbul.
He assumes the central bank would "intervene gradually by tightening Turkish lira liquidity to stop further bleeding."
In further grim news for the economy, unemployment in Turkey rose to 11.3 percent in January up from 10.9 percent in December, the statistics office said Wednesday, its hightest level since 2010.
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