May 16 2018

Turkish lira firms after central bank to meet Erdoğan

Turkey’s lira gained from a record low against the dollar on a report on NTV news channel that central bank officials will meet with President Recep Tayyip Erdoğan.

The lira rose 0.6 percent to 4.42 liras per dollar at 1:24 p.m. in Istanbul. It had sunk to 4.5 per dollar earlier on Wednesday, an all-time low.

Erdoğan will meet with Central Bank Governor Murat Çetinkaya as well as Finance Minister Naci Ağbal and Development Minister Lütfi Elvan, NTV said. Erdoğan met with the central bank and ministers last week in hastily-arranged discussions as the lira weakened. The meeting raised hopes among investors that Turkey would raise interest rates to arrest the lira's decline, but no hike was forthcoming.

The lira also strengthened after the central bank, breaking a weeks-long silence, said it was “monitoring unhealthy prices” and will take necessary action considering the effects on inflation.

Turkey’s currency has slumped against the dollar and euro over recent months amid concern among investors that stimulus by the government is overheating the economy. The central bank has been under political pressure to keep interest rates low ahead of elections in June. It has less than $30 billion in foreign currency reserves to help prop up the lira.

The government “remains committed to a sound and prudent policy framework”, Deputy Prime Minister Mehmet Şimşek said on Twitter. “The policy mix is much more likely to improve post elections.”