industry

Turkey election latest: Lira PLUNGES as TRY loses more ground against US dollar


The Turkish lira is currently down 1.5 percent versus the American greenback and is trading at 5.6442 as of just after 2:00PM UK time.

It comes after the struggling currency tumbled 5 percent on Thursday, closing at 5.5825.

The fall of the lira, after a defiant comeback earlier in the week, reflected a return of liquidity to a key London foreign-exchange market.

In an attempt to stabilise the currency since an initial sell-off last Friday, the Turkish government had directed banks to temporarily starve the London market of lira liquidity, according to officials.

Finance Minister Berat Albayrak said on Thursday that Turkish banks were providing billions of lira to foreign markets and promised the nation would enter a reform period after the elections.

Analysts have raised doubts about a quick fix for an economy in the midst of a recession that could last well into this year.

Jason Tuvey, senior emerging markets economist at Capital Economics, said: “Concerns about Turkey’s economy and financial markets are unlikely to fade even once Sunday’s local elections are out of the way.

“If anything, we think that they will intensify.

“The tightening of financial conditions adds to the reasons to think that, even once the economy emerges from recession, the recovery will be slow-going.”

The Turkish liquidity squeeze pushed the London swap rate to a record 1,200 percent on Wednesday – the highest ever recorded.

It has since slid back to more normal levels and was 23.75 percent on Friday.

At its worst, the Turkish lira lost around 30 percent of its value against the US dollar last year.

Yesterday saw President Tayyip Erdogan vow to reform the struggling economy to protect it against attacks after the elections.

The Turkish leader declared he was in charge of the economy during a rally in the capital of Ankara, just days before the country heads to the polls on Sunday.

Analysts and polls suggest President Tayyip Erdogan and his AK Party could be defeated in Ankara in the upcoming local elections, after 15 years in power.

A defeat in Ankara would be a huge blow to the Turkish leader, according to political analyst Murat Yetkin.

He said: ”The psychological factor of losing the capital, losing one of the big cities in Turkey, could be perceived by voters as the beginning of the decline.”

Piotr Matys, an EM FX strategist at Rabobank, said in a note: “The response from the administration to the outcome of this crucial vote – seen by many as a referendum on President (Tayyip) Erdogan and his executive powers – will be critical for the lira and local assets.”



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.