Turkish lira hits record low against dollar

Turkey's lira continued to weaken on Oct. 12 and hit 9.03 against the dollar. The lira tumbled 6.5% in September and has continued to slide in October.

Tuesday October 12 2021 10:28 am

Duvar English

Turkey’s lira dropped to a record low on Oct. 12 as a stronger U.S. dollar weighed on emerging-market currencies, adding to bearish momentum on the lira since the nation’s central bank unexpectedly cut interest rates last month.

The lira hit 9.03 against the dollar, following last week’s rout in Treasuries that drove the ten-year yield to a four-month high, Bloomberg reported.

The lira tumbled 6.5% in September and has continued to slide in October. The slump accelerated after the central bank, known as CBRT, delivered a surprise cut of 100 basis points on Sept. 23, a move that stoked concerns about inflation and enabled fixed-income investors to earn higher returns abroad.

The Turkish central bank cut rates last month after evaluating demand factors that can be affected by monetary policy, despite supply-chair bottlenecks that have led to an acceleration in inflation, Governor Şahap Kavcıoğlu told parliament on Oct. 11.

“CBRT has made lira vulnerable with its narrative on low rates despite high inflation and caused another major sell-off in the lira,” Piotr Matys, senior currency analyst at InTouch Capital Markets Ltd said.

Citing sources, Reuters reported on Oct. 8 that Erdoğan is losing confidence in Kavcıoğlu, less than seven months after he sacked his predecessor, because the easing came too late for the president.

The markets have also been concerned about heightened regional tensions, with the latest drop coming as President Recep Tayyip Erdoğan made a thinly veiled warning of a possible military offensive into neighboring Syria. Turkey-backed rebels are fighting there against forces loyal to Syrian President Bashar al-Assad and Kurdish militia.

Erdoğan said in Ankara on Oct. 11 that Turkey is determined to eliminate threats emanating from Syria “either through forces that are active there, or by our own means.”