Turkish lira hits record low against dollar on political worries
ISTANBUL - Reuters
REUTERS PhotoThe Turkish lira plumbed another record low against the dollar on April 14, as investors punished the currency on fears of rising political instability ahead of the June 7 parliamentary election.
While the resurgent dollar has hit emerging market currencies across the board, the lira has stood out for its underperformance, hurt by worries about both political meddling in monetary policy and the make-up of Ankara’s economic team after the election.
In addition, analysts are now faced with the possibility of a coalition government after the elections, also seen as a negative.
“Turkey’s risk premium is on the rise,” said Işık Okte, investment strategist at TEB Invest.
“We are concerned about the degree of this negative divergence in the lira and suspect that it is not only the make-up of the economics team post-general elections or the worsening growth dynamics at play here.”
The lira touched a low of 2.6740 against the dollar before recovering slightly to 2.6681, down from 2.6542 late on April 13.
The lira has lost 12 percent to the dollar this year, the worst performer among all major emerging market currencies apart from Brazil’s real.
Prime Minister Ahmet Davutoğlu has indicated that well-respected economy chief Ali Babacan would not be a minister after the June election - potentially bad news for an economy expected to grow 3 percent this year, below the government’s target.
President Tayyip Erdoğan has also bruised sentiment by fulminating against high interest rates, comments which have raised concern about the independence of the Central Bank.