The ailing Turkish currency has fallen to an all-time low against the US dollar and the euro in recent months.
(Photo: dpa)
Istanbul For the second time this week, the Turkish central bank has given the tumbling national currency the lira a helping hand. You sold dollars on Friday because of “unhealthy pricing” at the exchange rate, as the central bank announced. The intervention initially gave the Turkish currency a boost: In return, the dollar fell to 13.4906 lira after rising to a record high of 13.8889 lira.
As long as the central bank does not raise its key interest rates, a continued devaluation of the currency must be expected, warned Craig Erlam, a market analyst at brokerage house Oanda.
The Turkish lira has lost around 47 percent of its value this year. According to experts, this is also due to the fact that the central bank recently lowered its key rate several times to the current 15 percent – despite an inflation rate of now more than 21 percent in November.
This makes the lira less attractive to investors. “Interest rates are an evil that makes the rich richer and the poor poorer,” President Recep Tayyip Erdogan defended the controversial central bank course this week.
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The central bank has rapidly lost its reputation among investors. Erdogan, who repeatedly campaigns publicly for lower interest rates, has worn out three central bank chiefs within two and a half years, which has shaken the credibility of the monetary authorities.
This week he also replaced Finance Minister Lütfi Elvan with his previous deputy, Nureddin Nebati, after only about a year in office. This defended the controversial interest rate.
More: Currency crisis in Turkey: President Erdogan is exchanging finance ministers again