The Turkish lira fell 1.3% to a new all-time low on Wednesday as higher-than-expected US inflation extended a series of currency losses driven by worries about early interest rate cuts.
With the worst performance in emerging markets this year, the pound fell to 9.875 against the dollar, surpassing the previous record of 9.85, set two weeks ago. One dollar was trading at ,8 9,825 at 14:25 today (GMT).
US inflation data strengthened the dollar as investors sought to hedge a possible premature policy tightening by the Federal Reserve. Rising US interest rates tend to raise capital from emerging economies with high external debt, such as Turkey.
Foreign investors have reduced their exposure to Turkey over the past five years, as inflation has remained largely double-digit and concerns have grown about President Tayyip Erdogan’s intervention in the central bank, including a rapid change of leadership.
The pound has lost nearly 25 percent this year, including 15 percent since early September, when the bank – under pressure from Erdogan – began preparing the ground for a policy easing, despite inflation approaching 20 percent.
It has since reduced its policy rate by a total of 300 basis points to 16%, leaving Turkey with deeply negative real returns – a red flag for investors.
Petros Kranias
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Source From: Capital
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