SULAIMANI (ESTA) — The Turkish lira continued its dive into uncharted territory on Thursday, touching a new low of 9.94 to the dollar after a jump in U.S. inflation exacerbated worries for a currency already hobbled by the central bank’s unorthodox rate cuts.
The lira was down 1.2% and near the psychological threshold of 10 versus the U.S. currency, according to Reuters.
It has shed two-thirds of its value in five years, eating into the incomes of Turks along with double-digit inflation.
At 1042 GMT, one dollar was worth 9.946 Turkish lira. The Turkish currency – the worst performer in emerging markets again this year – was also nearing a record intraday low versus the euro at 11.41.
The higher-than-expected U.S. inflation data boosted the dollar as investors weighed a possible earlier policy tightening by the Federal Reserve. Rising U.S. rates tend to pull funds from emerging economies with high foreign debt, like that of Turkey.
The lira has lost 25% of its value this year mainly due to concerns over monetary policy credibility as President Tayyip Erdogan pushed for lower interest rates to boost growth despite inflation running near 20%.
“Turkey is increasingly less attractive,” for foreign investors, Reuters cited Cristian Maggio, analyst at TD Securities, as saying.
“If there are further rate cuts, real yields could go to negative 500 or 600 basis points. And historically, any level that is so misaligned with the rest of the market doesn’t bring good things to Turkey,” he said.
