Turkish lira extends lowest levels since May as rates decision looms
Turkey’s lira, suffering a fresh bout of weakness over tensions in neighbouring Syria, added to the lowest levels since May on Tuesday as the central bank prepared to extend a series of rate cuts.
The lira dropped to as low as 6.07 per dollar in Istanbul. It traded down 0.4 percent at 6.06 against the U.S. currency at 2:08 p.m. local time.
The central bank, which has slashed interest rates to 11.25 percent from 24 percent in July, when President Recep Tayyip Erdoğan replaced its governor, is set to reduce borrowing costs by another 0.5 percentage points when it meets on Wednesday, according to a Reuters poll of economists.
The currency weakness comes as Turkey gets increasingly embroiled in fighting between the army of Syrian President Bashar Assad and Islamist fighters who represent the last stronghold of opposition to his rule from the northwestern province of Idlib. Senior Turkish officials held talks with their Russian counterparts in Moscow on Tuesday in a second day of meetings designed to secure a ceasefire.
As fighting rages across Turkey’s borders – more than a dozen Turkish soldiers have died in clashes with the Syrian army in the past two weeks, investors are concerned that further monetary easing by the central bank could leave the lira exposed as inflation accelerates.
Losses for the lira now total about 2 percent this year. The currency dived 28 percent in 2018 after a political crisis erupted with the United States over the detention of a U.S. pastor and the government pump-primed the economy with cheap loans and other incentives. The lira fell an additional 11 percent against the dollar last year.
The main BIST-100 share index also fell on Tuesday, losing 0.6 percent to 12,085 points. Shares of Garanti BBVA, a large Turkish bank favoured by many foreign investors, dropped 0.9 percent to 11.63 liras.