The Turkish lira yesterday crashed as much as 7 percent in just a few minutes to a new record near 15 to the US dollar, gripped by worries over Turkish President Tayyip Erdogan’s risky new economic policy and prospects of another interest rate cut on Thursday.
The sudden slide left the currency with half the value that it had at the end of last year, fueling inflation in a big emerging market economy that depends heavily on imports.
The central bank had previously kept the lira below the 14.0 level, intervening in the foreign exchange market three times in the past two weeks by selling US dollars. Yesterday, it intervened for the fourth time, citing “unhealthy” price transactions in the market.
The lira slid as far as 14.99 against the US currency, losing 7.3 percent of its value since Friday’s close of 13.889. It traded 2.6 percent weaker at 14.25 following the intervention.
Turkey’s central bank is expected to cut its policy rate by 100 basis points to 14 percent this week, a Reuters poll showed on Friday, despite inflation soaring to 21.3 percent last month.
Investors and savers are concerned about recent aggressive monetary easing under which the central bank has slashed its policy rate by 400 basis points since September last year.
Erdogan has repeatedly advocated for the rate cuts, as he promotes a new economic plan prioritizing economic growth, credit, production and exports, despite criticism of the policy from economists and opposition politicians.
Additional reporting by Bloomberg
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