Turkey lira hits new record low on Syria tensions
Apr 12, 2018 06:48 AM GMT+0530 | 0 Comment(s)
AFP - The Turkish lira struck a new record low on Wednesday against the dollar as tensions between the US and Russia over Syria added to concerns over economic fundamentals at home.
Investors remain concerned over the risk of the Turkish economy overheating with inflation still in the double digits after growth of 7.4 percent in 2017.
The lira touched 4.19 to the dollar, a decline of 1.9 percent in value on the day, before recovering slightly. It fell to 5.18 against the euro, a loss of 2.0 percent on the day.
The Turkish currency has lost nearly 8.6 percent against the dollar in the past month and 9.2 percent against the euro.
Data published earlier on Wednesday showed that in February Turkey's current account deficit remained high at $4.15 billion, albeit slightly below the market consensus of $4.2 billion.
Economists have long pointed to the gaping current account deficit -- an indication that Turkey is importing more in goods and services than it exports -- as a risk factor for the economy.
William Jackson, senior emerging markets economist at UK-based Capital Economics, said the current account deficit, as well as the need for debt restructuring at Turkey's big conglomerates, were likely to keep pressure on the lira over the coming weeks.
Jackson said in a note that he expected the central bank to respond by raising interest rates at the next monetary policy committee (MPC) meeting on April 25.
"And if the MPC doesn't tighten policy, history suggests the fall in the lira will gather pace in the immediate aftermath of the decision, which could force policymakers to hold an emergency meeting to raise rates," he added.
However the Turkish central bank has been under public pressure from President Recep Tayyip Erdogan, who repeatedly called for rates to be cut to ensure strong growth.