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Forex - Turkish lira hits record low vs. dollar

Published 01/06/2014, 08:22 AM
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Investing.com - The Turkish lira fell to a record low against the dollar on Monday as worsening inflation expectations and ongoing political volatility continued to pressure the currency lower.

USD/TRY rose to highs of 2.1948 and was last up 0.50% to 2.1896.

The Turkish lira slumped to fresh lows amid expectations that tax increases which came into effect last week would push the annual rate of inflation up to 8% in 2014, well above the government’s year-end forecast of 5.3%.

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.

The bank had instead focused efforts on currency market interventions but reduced the scale of foreign exchange sales last Thursday, sending the lira slumping to a low of 2.1840 to the dollar.

Concerns over political upheaval also weighed, in the wake of a cabinet reshuffle and calls for Prime Minister Recep Tayyip Erdogan’s resignation last week. In December prosecutors launched a wide ranging investigation into corruption, focusing on figures close to the ruling APK party.

The selloff on the lira has also been fuelled following the Federal Reserve’s December decision to roll back its asset purchase program to USD75 billion a month from USD85 billion a month starting this month.

Elsewhere, the euro was close to record highs against the lira, with EUR/TRY advancing 0.86% to 2.9838, not far from the highs of 3.0156 struck last Thursday.




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