The Turkish pound continues to move in uncharted waters today, falling to a new low – a record 9 9,975 per dollar as the jump in US inflation has fueled concerns about the Turkish currency already hit by unorthodox central bank interest rate cuts.
The Turkish currency has fallen as much as 1.2% to near the psychological level of 10 pounds per dollar, and has lost two-thirds of its value in five years, eroding Turkish incomes combined with double-digit inflation.
At 13:56 (Greek time) the dollar exchange rate was at 9.9145 pounds. The Turkish currency also approached its low intra-conference level against the euro, with the exchange rate reaching 11.4386 pounds.
Higher-than-expected inflation in the US strengthened the dollar as investors weighed a possible faster tightening of central bank policy (Fed). Rising US interest rates tend to lead to capital outflows from emerging economies for high external debt, such as Turkey.
The pound has lost 25% of its value this year, mainly due to concerns about the credibility of monetary policy, with President Recep Tayyip Erdogan pushing for interest rate cuts to boost growth, despite the fact that Inflation is running at a rate of 20%.
Since September, the central bank has cut its key interest rate by 3 percentage points to 16%, arguing that inflationary pressures are temporary. Analysts expect larger reductions, although the real interest rate (s.s .: nominal interest rate minus inflation) is already strongly negative.
“Turkey is becoming less and less attractive” to foreign investors, said a TD Securities analyst, adding: “If there are other interest rate cuts, real yields could fall to -5% or -6%. “And historically, any level that is so inconsistent with the rest of the market does not bring good things to Turkey.”
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