Turkey's embattled lira on Wednesday took a new pounding on foreign exchange markets as emergency measures announced by the central bank failed to impress markets rattled by terror attacks and political instability. The lira has lost almost 10 percent in value against the American dollar since the start of this year alone with President Recep Tayyip Erdogan's plan for a presidential system, currently debated by parliament, unnerving investors. The lira lost 1.15 percent against the dollar to trade at 3.84 to the greenback, having earlier reached a new historic low in value of 3.89.
Against the euro, the lira crashed through the 4.0 ceiling for the first time in history to trade at 4.06 to the euro, a loss of 1.19 percent in value on the day. Economists have expressed alarm that the pressure could continue due to concerns over security and political stability as Erdogan drives for a presidential system under a new constitution. The central bank on Tuesday sought to halt the slide by relaxing foreign exchange rules to inject 1.5 billion dollars into the market.
But the move failed to halt the bloodletting on the markets with analysts saying more was needed. "Directionally, we see these measures supportive for the currency," economists at Finansbank said in a note to clients. But they added: "In terms of magnitude, however, it is a different story. We think the impact on currency is likely be limited." Despite the turbulence that has seen the lira lose 25 percent against the dollar in the last three months alone, Turkish officials remained sanguine.
"The exchange rate is not more important than the current account, deficit, employment, growth or inflation," Turkey's Economy Minister Nihat Zeybekci was quoted as saying by the Hurriyet daily. Cemil Ertem, a senior advisor to Erdogan, blamed a conspiracy from abroad to encourage speculation and devalue the lira during the constitution debate. "There's an operation going on to quickly devalue the Turkish lira. This is not a conspiracy theory. It's a very clear reality," he said.
Hurriyet's economic columnist Ugur Gurses said the central bank was powerless to make any major change given the political background and could only act as a "fire brigade". "The turbulence experienced in the Turkish financial markets is completely fuelled by the political field," he wrote. - AFP, Istanbul