Turkey’s embattled lira took a new pounding on Jan. 11 on foreign exchange markets as emergency measures announced by the Central Bank failed to impress markets.
The Turkish Lira has lost almost 10 percent in value against the U.S. dollar since the start of this year alone, falling to 3.84 to the greenback, having earlier reached a new historic low of 3.89.
Against the euro, the lira crashed through the 4.0 ceiling for the first time in history to trade at 4.06 to the euro, a loss of 1.19 percent in value on the day.
Economists have expressed alarm that the pressure could continue due to concerns over security and political stability as President Recep Tayyip Erdoğan
drives for a presidential system under a new constitution.
The Central Bank sought to halt on Jan. 10 the slide by relaxing foreign exchange rules to inject 1.5 billion dollars into the market.
But the move failed to halt the bloodletting on the markets with analysts saying more was needed.
“Directionally, we see these measures as supportive for the currency,” economists at Finansbank said in a note to clients. But they added: “In terms of magnitude, however, it is a different story. We think the impact on currency is likely be limited.”
Despite the turbulence that has seen the lira lose 25 percent against the dollar in the last three months alone, Turkish officials remained sanguine.
“The exchange rate is not more important than the current account, deficit, employment, growth or inflation,” Turkish Economy Minister Nihat Zeybekci said.
Cemil Ertem, a senior adviser to Erdoğan, accused a conspiracy from abroad of encouraging speculation and devaluing the lira during a debate on contentious constitutional amendments that would allow Erdoğan to rule with few checks and balances.
“There’s an operation going on to quickly devalue the Turkish Lira. This is not a conspiracy theory. It’s a very clear reality,” he said.
The demand is speculative and coming from foreign markets, he said, adding that it was spurred by the start of a parliamentary debate over a package of constitutional changes to move Turkey to a presidential system.
But Ertem said Turkey also needed to do its part in terms of structural reforms, adding that that was the only way to deepen the country’s financial markets and help prevent speculative moves from disrupting them.
Hürriyet columnist Uğur Gürses said the bank was powerless to make any major change given the political background and could only act as a “fire brigade.”