Turkish Lira hits another record low on current account gap data

ISTANBUL

The Turkish Lira is quickly approaching a new threshold of 2.2 against the dollar. DAILY NEWS photo

The Turkish Lira slumped to a record low against the U.S. dollar and the euro after the announcement of current account deficit data that fueled concerns over the country’s financing vulnerabilities.
 
The Turkish currency sank on Jan. 14 to a record low against the euro, hitting the psychologically key level of three lira to the euro.

After starting off the day at around the 2.18 level, the Turkish currency jumped to an all-time record of 2.1977 against the dollar.

The Istanbul stock market also lost ground, sliding 1.32 percent to 67,221.75 points.

The slump followed the Central Bank’s announcement that Turkey’s current account deficit had risen to $3.9 billion in November from $2.9 billion the previous month.

The current account deficit recorded $55.9 billion in January-November indicating an increase of $12.3 billion, while the current account deficit excluding non-monetary gold decreased by $3.5 million over the same period of the previous year decreasing to $45.5 billion, the statement released on the bank’s website read.

The current account deficit has also become $60.8 billion on an annual basis.

The expansion of the deficit was stemmed from the increase in the foreign trade and
income deficits despite the net rise in the services surplus mainly owing to increasing net revenues in travel and other transportation items.

“The external deficit that Turkey can sustain is much lower now. Therefore, we foresee Turkey’s external deficits to continue to shrink in the forthcoming period, on account of the weakness of the Turkish lira and a likely weakening of the domestic demand as well as the recovery of the global economy,” Finansbank also said.

 The foreign trade deficit increased by $11.5 billion reaching $71.5 billion in the referring period, as the foreign trade deficit excluding non-monetary gold declined by $4.3 billion, degrading to $61.5 billion.

The travel revenues increased by $2.8 million reaching to $26.9 billion and the travel expenditures increased by $881 million recording $4.6 billion in the eleven-month period compared to the same period of the previous year.

Political crisis pressure adds to headaches

The stress on financial markets also came amid continuing investor concern about Turkey’s external financial position.

“Turkey is currently facing a dangerous combination of large external imbalances, higher global yields and escalated domestic political tensions,” Finansbank said in a commentary.

The lira had recovered from historic lows of last week at the beginning of the week thanks to weaker-than-expected U.S. jobs data, which calmed fears that a faster cut in U.S. stimulus would stem cheap capital inflows. However, the wide-ranging corruption probe in Turkey is continuing to rattle the lira.
Turkey is particularly vulnerable to a cut in U.S. bond buying, which is set to take its first $10 billion reduction this month, as it depends on cheap capital inflows to finance its gaping current account deficit.

The currency plunged 17 percent last year because of a worsening global environment for emerging market assets, compounded by Turkey’s big external deficits and a corruption scandal which erupted in mid-December.

The lira/dollar ratio had last broken records on Jan. 6, when it dropped to 2.1950 against the dollar.