Investing.com - The Turkish lira fell to new lows against the U.S. dollar on Monday, as a broad based exodus from emerging market currencies continued amid a combination of concerns over the impact of the Federal Reserve scaling back its stimulus program and a possible slowdown in China.
USD/TRY rose to highs of 2.3798 and was last up 1.60% to 2.3746.
The lira continued to spiral to record lows after a direct currency market intervention by Turkey’s central bank on Thursday failed to stem the steep depreciation in the currency.
The central bank cited “unhealthy price developments” after the lira slipped below 2.30 to the dollar amid a broad based selloff of emerging markets.
The selloff in financial markets was triggered after data last week pointed to a steeper than expected slowdown in Chinese manufacturing, fuelling fears that weakness could spread to other emerging market economies.
The move came two days after Turkey’s central bank left rates on hold, despite deteriorating inflation expectations and a 10% decline in the lira since December.
Turkey’s lira is seen as particularly vulnerable to reductions in the Fed’s asset purchase program, as the country relies heavily on foreign investment to fund its huge current account gap.
The selloff in the lira has been further fuelled by investor concerns over local political tensions after a wide ranging corruption probe launched in December, focusing on figures close to the ruling APK party, forced a cabinet reshuffle.
Market participants were looking ahead to the outcome of the Fed’s monthly meeting on Wednesday, amid expectations for a reduction in its bond buying program to USD65 billion from the current USD75 billion.
Elsewhere, Argentina’s peso was in the spotlight after falling 11% against the dollar on Friday, its steepest fall since the country's 2002 financial crisis. USD/ARS edged up 0.02% to 7.9909, holding just below Friday’s highs of 8.1502.
Argentina's central bank said Friday it was loosening strict foreign exchange rules, giving up its traditional policy of supporting the currency through interventions.
Meanwhile, South Africa’s rand and the Russian ruble were trading close to five year lows against the dollar. USD/ZAR was up 1.12% to 11.2127, while USD/RUB climbed 0.77% to 34.791.