Lira slumps to new record lows as investor concerns escalate

Lira slumps to new record lows as investor concerns escalate

ISTANBUL
Lira slumps to new record lows as investor concerns escalate

Turkey’s embattled lira slumped almost five percent to new record lows in value against the United States dollar on July 11, hit by worries about economic management and monetary policy under Recep Tayyip Erdoğan’s stronger executive presidency.

The lira weakened to a record low of 4.9767 against the dollar late on July 11. The currency opened the July 12 trading at around 4.83 against the greenback.

The lira has shed nearly 25 percent of its value against the U.S. currency so far this year.

“We have many instruments. I believe we will see interest rates fall in the period ahead,” Erdoğan told reporters after his first foreign trip on July 10 following his inauguration.

“I am sure not just our state banks but our private banks will shoulder responsibility if necessary,” he added. 

Economists are urging tighter monetary policy to fight inflation.

The president also expressed confidence that the newly-appointed Treasury and Finance Minister Berat Albayrak, who is also his son-in-law, would “set things on the right track.”

Bank stocks plunge

Fall-out from Turkey’s tumbling lira hammered banking shares on July 11, sending the Istanbul stock market to its biggest one-day fall in two years.

The main share index dropped more than 5 percent while bank stocks lost 9 percent in their worst day for five years.

Investors are mainly selling bank stocks, reflecting fears that Turkish lenders could face a wave of bad debts as overextended companies struggle to repay foreign-currency loans. 

Turkish firms had $225 billion in long-term, overseas borrowings as of April, almost all in dollars or euros, Central Bank data shows.

The Istanbul bourse’s index of bank stocks fell 9.19 percent by the July 11 close, recording its biggest one-day fall since June 2013, according to Reuters data. 

The BIST 100 stock index fell 5.18 percent, recording its biggest one-day fall since a failed military coup in July 2016.

The yield on Turkey’s benchmark 10-year bond rose to 18.48 percent from 17.36 percent at close on July 10.

Turkish Lira, dollar/lira, Turkish economy, BIST