Turkish Central Bank move could plunge lira into further turmoil

The lira hit a record low of 7.22 per dollar in August and lost almost a third of its value by December. (AFP)

The Turkish lira is the world’s worst-performing currency, having lost more than 5 5% of its value from a high at the end of November.

The slide against the dollar began last year with political tensions with the US over Turkish invasion of Syria’s Afrin city and imprisonment of a US pastor by Ankara, which resulted in economic sanctions. The lira hit a record low of 7.22 per dollar in August and lost almost a third of its value by December.

The decline has continued this year. The latest bout of political tension began on Sunday with President Trump’s warning of economic devastation should Turkish forces attack Kurdish fighters across the border in Syria.

The lira dropped 1.5 percent to 5.53 per dollar at 10:45 a.m. on Monday in Istanbul. The main BIST-100 share index declined 1 percent to 90,817 points.

According to a Bloomberg report, the lira “could fall on harder times still if Turkey’s central bank has a surprise interest-rate cut in store” tomorrow.

“The lira would probably come under a bit of pressure if the Monetary Policy Committee does decide to cut rates, given that it would be a surprise to the markets,” Jason Tuvey at Capital Economics told Bloomberg.

What’s more, he said “there’s a big risk that the central bank of Turkey ultimately lowers rates more aggressively, triggering a sharp sell-off.”

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Last Update: Wednesday, 20 May 2020 KSA 09:54 - GMT 06:54
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