Turkey’s lira in late-day slide to weakest level since May

Turkey’s currency tumbled late on Friday to its weakest level in regular trading since May after the Treasury minister suggested the central bank could continue cutting rates and as the Turkish military girded for more confrontation in Syria.

The lira was down 0.8 percent at 6.0395 against the dollar at 1517 GMT, on track for its sharpest daily drop since October. After closing at 5.9885 on Thursday, it weakened to as far as 6.05 amid a selloff in emerging market currencies.

The lira’s one-month implied volatility jumped in late-day trading to its highest level in two weeks, marking a reversal of a broader stabilization trend since May.

The Treasury minister, Berat Albayrak, said earlier on Friday that state banks had agreed to bring annual loan rates down to a 8-10 percent range.

That could suggest the central bank will continue easing policy after having cut rates to 11.25 percent from 24 percent in July, pushing yields on local lira accounts into negative territory.

Separately, President Tayyip Erdogan has warned Turkey’s military could drive back Syrian government forces advancing in Syria’s northwest Idlib region. Syrian shelling killed eight Turkish personnel there on Monday, prompting a retaliation.

The lira has shed 36 percent of its value in two years after a currency crisis in 2018 tipped Turkey’s economy into recession.

Another selloff hit the currency in April and May of last year as concerns grew about US sanctions and a contested Istanbul election.

Since then, a series of government efforts to clamp down on financial markets and stabilize the lira has driven out foreign investors and could leave the economy more fragile to another shock, economists say.