Lira Tumbles 3% Further on No Agreement with the U.S. #TurkeySanctions
The Turkish lira dropped sharply in early London trade amid a fresh jolt of volatility on Thursday, leaving the embattled currency at a new historic low.
The lira was down as much as 2.9 per cent for the day, with one dollar buying 5.4364 units of the currency. At its low on Monday, it had slumped to TL5.4253.
Turkish officials held meetings on Wednesday with US state department officials, following a move by the US to hit two senior Turkish government ministers with sanctions over the detention of an American pastor. However, there was no indication of a resolution by Thursday morning.
“We held additional talks with Turkish officials. The conversations continue,” state department spokesperson Heather Nauert said after the meeting, according to a report by Reuters.
President Recep Tayyip Erdogan and key policymakers have largely been silent since the start of the week, when the lira’s descent began to accelerate. The president was quoted as telling a group of businessmen on Wednesday that the meeting in Washington showed “the process was working.” “Everything will get better in a reasonable time. The markets will settle down. Don’t be afraid at all, it will all pass,” he said, according to Milliyet newspaper. Thursday’s decline in the lira came amid a gloomy backdrop for emerging market currencies.
Turkey itself is dealing with a slew of other issues. Its economy is showing signs of overheating, with inflation running at nearly 15 per cent. Meanwhile, investors are increasingly worried about the central bank’s independence after it declined to raise interest rates last month despite the rapid price growth and market expectations for such a move.
The president has repeatedly criticised high interest rates, and blamed foreign forces for the currency’s weakness. “The Turks need to get this resolved ASAP, these markets cannot stand the suspense at this stage,” said Timothy Ash, emerging markets sovereign strategist at BlueBay Asset Management, referring to the negotiations with the US. “The US is under little pressure to move quickly to compromise, but the fragile state of Turkish markets suggests they have to get real and cut a deal.”