The Turkish lira continues to fall, topping the chart of the weakest emerging currencies.
At the auction on Friday, the lira against the dollar broke through the “bottom” of November last year and set a new absolute minimum.
At 15.51 Moscow time, the Turkish currency depreciates by 1.3% and is trading at 8.6 lira per dollar, although in mid-February it was kept around 7 per dollar.
Since the beginning of the year, the lira has fallen in price by 16%, and since the start of the pandemic – by 44% amid the loss of tourism revenues and a sharp acceleration in inflation, which forced the population to save savings in foreign currency, crypto assets and gold.
A new wave of devaluation was triggered by large external debt repayments due to Turkey in June, two traders working in the country’s market told Bloomberg.
In the coming month, Turkish companies are due to pay off on loans of $ 6.9 billion – the maximum amount for the next 10 months. All in all, Turkey’s short-term foreign debt in foreign currency exceeds $ 180 billion, of which two-thirds lies with the private sector.
For June payments, a number of local players are buying dollars, which pushes the lira down, despite the Central Bank’s rate hike to 19%, traders say.
Lira suffers from a lack of confidence in the central bank, which cannot fight inflation due to President Recep Erdogan’s unconventional economic views, who believes that high rates do not slow down inflation, but rather accelerate it, said Tata Gose, an economist at Commerzbank.
Over the past two years, Erdogan has dismissed three heads of the central bank, and last week fired another deputy chairman of the regulator.
The Central Bank of Turkey cannot respond by raising the rate to the fall of the lira for political reasons, this further accelerates inflation, the real profitability of Turkish assets decreases, which again puts pressure on the exchange rate – this is how the situation closes in the already known vicious circle, Gose notes.