Turkish Lira Weakens, Further Eroding Last Week’s Gains

0 170

Turkey’s lira weakened as much as 2% on Tuesday, extending sharp losses seen a day earlier and eroding massive gains made last week, as worries about the country’s monetary policy weighed further on sentiment.

At 0800 GMT, the lira was 1.7% weaker at 11.9 to the dollar, having touched a low of 11.949 earlier. Despite staging huge rebound last week, it lost 37% of its value against the U.S. currency so far this year.

The lira surged more than 50% last week following billions of dollars worth of state-backed market interventions. A government move to cover FX losses on certain deposits, bringing the currency back to its mid-November levels.

According to a central bank document sent to banks on Monday it will support these forex-protected lira deposit accounts by not applying required reserve ratios on them. It will impose a higher commission on banks where the transfer from forex accounts to lira accounts does not exceed a certain level.

According to traders’ calculations, the central bank’s net forex reserves excluding swaps fell some $8 billion last week, with most of the fall in the first two days of the week. They were down $17-18 billion as of last Friday since the start of the month, when the bank began its direct interventions.

Turks did not sell dollars in large quantities on Monday and Tuesday of last week, according to official data that suggested they had played little role in the gains.

The central bank has slashed its policy rates by 500 basis points to 14% since September, despite inflation that has risen to more than 21%. Economists expect inflation to exceed 30% next year in part due to the lira depreciation.
– Reuters

Leave A Reply

Your email address will not be published.

%d bloggers like this: