Turkish Lira weakens to record low against dollar amid dollar rally, concerns
The Turkish Lira extended its relentless tumble on May 21, sliding more than 2 percent against the dollar, hit by a surging greenback and concerns about the Central Bank’s ability to rein in double-digit inflation.
The lira has lost 17 percent so far this year, making it one of the worst-performing emerging market currencies.
“This is driven by a global environment that is continuing to deteriorate, characterized by higher U.S. Treasury yields and a stronger dollar,” said İnan Demir, senior emerging economist at Nomura International, as quoted by Reuters on May 21.
“The situation was exacerbated by the [President Recep Tayyip] Erdoğan speech last week in London and the fact that the Central Bank seems unable to act to stop the currency weakness.”
The lira traded at 4.5920 against the dollar by 1238 GMT, having touched a record low of 4.5933 earlier.
The lira also hit record lows against the euro and the yen and Turkey's dollar-denominated bonds tumbled.
Annual inflation stood at 10.85 percent in April, and it has been as high as 12.98 percent in recent months.
The strengthening dollar also did not help. The greenback touched its highest against a basket of currencies in some five months, as good news came about the ease of trade conflicts between the United States and China.
The dollar’s index against a basket of six major currencies set a fresh five-month high on May 21, touching a peak of 93.860 at one point.
U.S. Treasury Secretary Steven Mnuchin declared the U.S. trade war with China “on hold” following an agreement to drop their tariff threats that had roiled global markets this year.
Mnuchin and U.S. President Donald Trump’s top economic adviser Larry Kudlow said the agreement reached by Chinese and American negotiators on May 19 set up a framework for addressing trade imbalances in the future.