2023-07-17 21:14:02
New York (awp/afp) – The Turkish lira fell to a new all-time low against the dollar on Monday, on a market skeptical of the economic shift attempted by the government, against a backdrop of still galloping inflation.
The Turkish currency fell to 26.3639 pounds to the dollar, a first since the introduction of the new pound in January 2005.
Since the end of May, the currency, initially introduced in 1844 under the Ottoman Empire, has dropped 24% against the greenback.
After his re-election at the end of May, Turkish President Recep Tayyip Erdogan appointed as head of the central bank (TCMB) a moderate figure, Hafize Gaye Erkan, from the private banking sector in the United States, who immediately raised the main rate manager from 8.5% to 15%.
He also appointed a former economist from the American bank Merrill Lynch, Mehmet Simsek, Minister of the Economy, giving the market hope for a return to a certain orthodoxy.
But the economic situation of the country continues to raise questions. Even at the lowest level for 18 months, inflation still came out at 38.2% in June, over one year, which plays against the pound.
Worse, market participants’ inflation expectations are on the rise, according to the latest TCMB survey.
According to several analysts, the slow drift of the Turkish lira is also the consequence of the decision of the Turkish authorities no longer to defend their currency at all costs, a posture which had dangerously melted the country’s foreign exchange reserves.
Moreover, the budget deficit reached the highest level ever observed in June, partly due to tax measures taken before the presidential election, such as free gas for households.
Mr. Simsek announced in June a return to “rational measures” to revive the economy, but the government has made no concrete announcements since, apart from the tripling of the gasoline tax on Sunday.
This decision raises fears both for inflation and for household consumption.
“How are investors supposed to keep faith in Turkey?” asks Adam Button of ForexLive. “There is a way to stabilize the economy, but for now it is difficult to think seriously about putting your money in Turkey.”
“Confidence is like toothpaste. Once it’s out of the tube, you can’t put it back in,” said Marc Chandler of Bannockburn Global Forex.
The next monetary meeting of Turkish central bank officials is on Thursday. JPMorgan analysts expect a further hike of 2.50 percentage points, which would take the key rate to 17.5%.
Monday price Friday price 8:50 p.m. GMT 9:00 p.m. GMT EUR/USD 1.1240 1.1228 EUR/JPY 155.91 155.84 EUR/CHF 0.9670 0.9677 EUR/GBP 0.8597 0.8575 USD/JPY 138 .70 138.80 USD/CHF 0.8603 0.8619 GBP/USD 1.3074 1.3093
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