And it's getting worse: Turkish lira hits new low
Turkey's lira continued its downward slide on Friday and fell to a new record low of 2.33 against the US dollar despite the central bank's intervention in foreign exchange markets to defend the currency.
The lira's steep decline comes amidst a similar free fall in other emerging market currencies against the greenback. The South African rand, the Russian ruble and, especially, the Argentinean peso, which fell 13 percent Thursday, led the losses in value of emerging country currencies on Friday. The lira broke through the key barrier of 2.3 to the dollar just hours after the central bank said in a statement that it was intervening in the markets due to "unhealthy price occurrences." It did not give further details, but sources said the bank had sold more than $2.5 billion to shore up the lira. The fall in the lira seemed to worry investors, who pushed the main stock index Borsa İstanbul (BIST) down 1.8 percent.
The bank intervened in the markets also on Friday, yet there were no estimates as to how much money in US dollars it had injected into markets. The bank's net forex reserves have fallen below $40 billion already. This week, the central bank decided against supporting the lira with an interest rate increase, a decision some analysts said was taken due to pressure from the government.
The Turkish currency has been falling steadily amid concerns that a bribery and corruption scandal that has ensnared people close to Prime Minister Recep Tayyip Erdoğan might destabilize the government. Observers said an intimidating and non-conciliatory tone used by Erdoğan might hit foreign investments in the country. Ian Bremmer, founder of Eurasia Group, said on Thursday, “Turkey is no longer an emerging market,” and “The crisis in the country will only end when the country's leader, Erdoğan, quits.”
- Giving up on the EU? Greece, Cyprus look to GCC investors
- Turkish whistleblower: government can hand over any bank to state fund
- Why Israelis are rushing to empty out their Swiss bank accounts
- Wealth in the land of Arab Spring: Egypt's top ten richest men in 2014
- Will the US dollar peg protect GCC currencies?