Turkish lira hits record low amid growing concerns over US ties

Turkey's lira dipped to record lows against the dollar on Sept. 27 after the central bank lowered interest rates despite surging inflation on Sept. 23, and President Erdoğan's remarks on purchasing the second batch of S-400s.

Duvar English - Reuters

Turkey's lira started the day at all-time lows on Sept. 27 with eyes on frayed relations between Ankara and the United States.

Turkey's lira firmed 0.4% after three sessions of losses that sent it to all-time lows of 8.8995 to the dollar. An unexpected rate cut in a surging inflation environment knocked the country's assets last week.

Over the weekend, President Recep Tayyip Erdoğan said Turkey still intended to buy a second batch of S-400 missile defence systems from Russia, a move that could deepen a rift with NATO ally Washington and trigger new U.S. sanctions.

The currency, down nearly 16% this year, is among the worst performers in emerging markets, with Turkey's heavy foreign debt and the independence of its central bank seen as the main concerns for investors.

On Sept. 23, the central bank was widely expected to hold interest rates steady at 19%, but instead delivered stimulus long sought by the president and sent the lira sinking 1%.

"The example of the previous rate-cutting cycle (in 2019) tells us that USD-TRY risks (could be) going exponential at some point in coming months," Commerzbank FX analyst Tatha Ghose wrote in a note.

"We hold a symbolic 10.00 forecast for the exchange rate, not in a fundamental fair-value sense, but as a warning to our readers about the magnitude of potential depreciation risk they face from this non-transparent, inconsistent monetary policy."

Turkish stocks dropped 0.6% as data showed business confidence among manufacturers fell in September from the previous month.