The Turkish Lira slid to a new record low against the U.S. dollar and euro due to ongoing security concerns and economic problems on Jan. 5, Doğan News Agency reported.
The lira declined to 3.64 against the dollar and 3.81 against the euro, making it the worst-hit emerging currency. The lira later eased slightly to 3.62.
Other emerging currencies swung between a rise of 0.4 percent and a 0.5 percent decline in value, although the lira’s loss exceeded 1.5 percent despite a declining trend in the dollar after the Federal Reserve’s latest meeting minutes were released.
Analysts voiced concerns about a potential rise in pressure over the Central Bank to cut rates although the inflation rate has been rising.
Analysts also underlined the rising political and geopolitical concerns which put the currency under more pressure.
“There was optimism in the morning, but this mood went away in minutes. The lira has been negatively differentiating from others once again, but we cannot name a particular reason. An upcoming Fitch decision and the concerns over whether the rates are not efficient can be named…We cannot show any development that will create optimism for the lira in the short term,” said an analyst, as quoted by Reuters.
Emerging currencies reversed strong early gains on Jan. 5 that were driven by the yuan’s surge to two-month highs against the dollar, though emerging stocks rose almost 1 percent after the U.S. Fed’s tempered rate hike expectations, Reuters reported.
Minutes of the Federal Reserve’s December 2016 meeting released on Jan. 4 showed policymakers thought the world’s largest economy could grow more quickly because of fiscal stimulus under President-elect Donald Trump’s administration.
Yet they also highlighted concerns over policy uncertainty and the impact of a continuously rising dollar, prompting the greenback to retreat from its 14-year high.
“The [U.S.] central bank is talking about the possibility of tightening further because of Trump’s fiscal plan but at the same time, there is some cautiousness in the minutes about what kind of plan he will be able to pass,” said Murat Toprak, FX strategist at HSBC, according to Reuters.
“The market has retained this pinch of salt as regards the outlook: There are too many uncertainties to draw a strong conclusion at this point,” he added.