Investing.com - The dollar rose to a fresh record high against the Turkish lira on Monday, as expectations for an interest rate cut from Turkey’s central bank at its monthly policy meeting on Tuesday diminished.
USD/TRY rose to highs of 2.2506 and was last up 0.32% to 2.2408.
The Turkish lira tumbled amid expectations that the country’s central bank will keep rates on hold at 4.5% in spite of deteriorating inflation expectations.
Turkey’s central bank has held back from interest rate increases, amid pressure from the government to avoid higher borrowing costs, which could act as a drag on growth. It has instead tried to prop up the lira through currency market interventions.
The lira has weakened dramatically in recent months as concerns over Turkey’s large current account deficit and political turmoil prompted a selloff in the currency.
Emerging market currencies, in particular the lira, have come under heavy selling pressure since the Federal Reserve’s decision to begin scaling back its asset purchase program in December. Emerging market economies rely heavily on foreign investment to fund their current account gaps.
Concerns over a corruption scandal surrounding Turkey's ruling APK party also continued to weigh. The lira has fallen to a series of record lows since a wide ranging investigation into alleged bribery was launched on December 17, resulting in the resignation of three cabinet ministers, following their sons’ arrest.
The euro also rose to record highs against the Turkish lira. EUR/TRY hit highs of 3.0467 and was last up 0.28% to 3.0343.