Summary:
Lira extended losses against USD on Tuesday, marking its worst weekly performance since July 21. Bloomberg reports it has lost over 7% this year.
The lira extended its loss against the dollar on Tuesday. The battered currency last week posted its worst weekly performance since July 21 and has lost over 7% this year, according to Bloomberg.
But Turkish Finance Minister Mehmet Şimşek sought to calm markets by suggesting that the recent volatility in the exchange rate, driven by soaring inflation and declining reserves, should be seen as temporary.
Inflation in Turkey rose to 67.07% last month, the highest in 15 months, smashing expectations and reigniting currency risk fears. That came after central bank kept the key interest rate on hold.
The country’s financial standing has received a boost as Fitch Ratings on Friday upgraded the long-term foreign-currency issuer default rating to “B+” from “B” while also revising the outlook from “stable” to “positive.”
President Erdoğan has voiced confidence in the government’s anti-inflation measures taking effect by the end of the year. He appointed a new cabinet and central bank leadership after his re-election last year.
Turkey is preparing for local elections at the end of March. The ruling party wants to recapture major cities such as İstanbul and Ankara, which are currently controlled by the opposition.
The lira is in free fall in the long term. Technical indicators have proved ineffective in predicting a turning point. Unless Turkey manages to rein in inflation, buying the dip is highly risky.
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