Turkish currency stems slide against greenback

ISTANBUL • Turkey's lira firmed yesterday, recouping some losses after tumbling to a series of record lows against the US dollar a day earlier on widening concerns about President Recep Tayyip Erdogan's grip on monetary policy.

The lira was at 4.5480 to the US dollar, gaining from a close of 4.5740. On Monday, the currency slid nearly 2 per cent to as far as 4.5995, a record low.

The lira's drop of some 17 per cent this year has made it one of the worst-performing emerging market currencies, and heightened expectations that the country's central bank may be forced to take emergency action and raise interest rates before its next scheduled policy-setting meeting on June 7.

Investors have been particularly unnerved by Mr Erdogan's comments last week, made during a visit to London, that he wants greater control over monetary policy after presidential and parliamentary elections due on June 24.

A self-described "enemy of interest rates", President Erdogan wants to see lower borrowing costs to fuel credit, whereas investors want substantial rate increases to rein in double-digit inflation. The central bank's reluctance to hike aggressively has deepened worries that it is not independent.

The yield on Turkish 10-year government bonds fell to its lowest in four sessions. Yields yesterday briefly spiked to their highest in at least eight years. The main share index rose 0.82 per cent.

The bank said last week that it was closely monitoring "unhealthy price formations" and would take necessary steps, considering the impact of these developments on the inflation outlook. It raised its late liquidity window by 75 basis points, to 13.5 per cent at its last meeting.

The central bank last week raised its annual inflation forecast to 11.07 per cent for the end of this year, from 10.07 per cent previously.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 23, 2018, with the headline 'Turkish currency stems slide against greenback'. Print Edition | Subscribe