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Turkish Lira Continues to Nosedive

Turkish Lira Continues to Nosedive

May 05
10:55 2018

The Turkish fell 1.5 percent in another record low against the dollar on 4 May  amid unrelenting concerns over rising inflation. Fuelled by the lira’s fall against the dollar, inflation rose to almost 11 percent in April.

Markets are also continuing their sell-off with stocks on track for a third straight week of losses and currencies suffering as the lira ends its worst week in nearly ten years, hitting a new record low.

Standard & Poor made the problem worse by cutting Turkey’s sovereign debt rating further into junk territory on May 1.

We are downgrading Turkey because of what we view as increasing macroeconomic imbalances. In this context, the downgrade reflects our concerns over a deteriorating inflation outlook and the long-term depreciation and volatility of Turkey’s exchange rate, notwithstanding the central bank’s recent decision to hike its late liquidity window rate. The rating action also reflects our concerns over Turkey’s deteriorating external position and rising distress in the externally leveraged private sector. It also reflects our view of weakening in Turkey’s fiscal position as a result of continued public and quasi-public stimulus to the economy,” the rating agency said.

Meanwhile Turkey’s most urgent economic problem is the rapid rise in prices ahead of the forthcoming elections on 24 June.

Hurriyet