On Tuesday Turkey’s lira slid as much as 4% in further volatile trade after tumbling to all-time lows a day earlier on concerns over President Tayyip Erdogan’s risky new economic policy and prospects for another interest rate cut this week. The infirm currency, which has lost almost half of its value against the dollar this year, touched 14.4 to the dollar before trimming losses to 14.3450 by 1042 GMT.
The lira crashed as much as 7% on Monday to a record near 15 before whip-sawing back after the central bank (TCMB) intervened for the fourth time in two weeks to prop it up. The dollar has firmed ahead of a key Federal Reserve meeting on Wednesday, with investors eyeing the possibility that it will start to raise interest rates in 2022, These domestic woes come against a backdrop of global market unease. Making an optimistic forecast for the Lira seem difficult as TCMB will continue with its triggering interest rate cuts, which would be leading to an outcome of continued lira losses.
Last week the central bank acted to keep the lira below 14, but abandoned that level on Monday as depreciation fuels inflation in the big emerging market economy that depends heavily on imports. According to Reuters, in spite of the inflation rate leaping, depreciation propels inflation in the big emerging market economy that depends heavily on imports.
The forex market interventions are an additional risk for a central bank that is not only easing policy but also has depleted foreign reserves. According to the calculations of bankers analysing official data, three traders estimated the central bank sold $2-2.5 billion dollars in interventions on Monday alone.
– Reuters