Ozgur Altug Comments: Turkish lira hits new record low against dollar

December 17, 2014, Oman Tribune – Online

Turkey’s currency the lira hit a new record low on Tuesday as investors moved out of emerging markets and fretted over the impact of raids against Turkish opposition media.

The lira hit a record low in value of 2.41 lira to the dollar, worse than Monday’s record low in value of 2.39 lira to the dollar. It subsequently recovered a little to trade at 2.37 lira to the dollar.

Against the euro, the currency struck a low in value of 3.03 lira to the euro, breaking through the crucial 3 barrier before recovering to 2.98 lira to the euro. The currency has now slumped past lows seen in late January when the country was on the verge of a full scale currency crisis before the central bank intervened with an emergency rate hike.

The arrests of over two dozen journalists, television wwwucers and police on Sunday rattled markets already concerned about Turkey’s exposure to emerging market weakness linked to the embattled Russian ruble. Sentiment on the lira turned negative on Monday when Erdogan gave a combative speech blasting the European Union for criticising the arrests.

The slide of the Russian ruble — despite an emergency rate hike — has added to concerns about the economic health of top emerging markets.

IMF and other international organisations have long warned that the Turkish economy is vulnerable to external and internal shocks – and to a fall in foreign financing. Because of its substantial current account deficit and the lack of a lira-denominated long-term debt market, the country — notably the corporate sector — needs more than $200bn of foreign financing a year, more than a quarter of gross domestic wwwuct, to maintain its current level of growth. Ozgur Altug, an economist at BGC Partners in Istanbul, said that the detentions and reaction to them were likely to have played a role, together with general emerging market weakness, in the lira’s fall.