Turkish lira plummets against dollar


"The government is committed to maintaining fiscal discipline and accelerating structural reforms [including macroprudential measures] to reduce the current account deficit and help the Central Bank's disinflation efforts", he said.

The lira had earlier lost over 3.5 per cent in value against the dollar but sharply gained in value after the bank's announcement, gaining 1.1 per cent in value on the day to trade at 4.62 lira to the dollar.

The move came after US dollar/Turkish lira exchange rate saw a historic high, climbing over 4.7500 at Wednesday's market opening. He warned that "there is no limit to how far this could go because this is becoming a currency crisis".

"There is an unhealthy situation in prices".

The continued depreciation of the Turkish currency would increase the chances of an emergency and substantial rate hike, said William Jackson, an emerging-market economist at Capital Economics, an economic research company.

Turkish Economy Minister Nihat Zeybekci indirectly called on the Central Bank to take action before it is too late. "If policymakers refrain from tightening monetary policy, the risk of a disorderly adjustment and a sharp economic downturn (possibly recession) will mount", he said.

Turkish lira bounced back from historic low 4.90 to 4.55 against the USA dollar after the Central Bank raised benchmark lending rate from 13,5% to 16,5% following an emergency meeting on Wednesday to prevent a full-scale currency crisis.

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Turkish President Recep Tayyip Erdoğan, who heads the AKP, on May 20 addressed thousands of expatriate Turks in the Bosnian capital of Sarajevo.

The Istanbul bourse said it was taking measures to convert its foreign exchange assets to lira to "fight speculative actions aimed at creating a negative image of Turkey", but it was unclear if this would have any impact on the currency.

The currency has lost 22% of its value in 2018, as fears grow that the government might undermine the powers of Turkey's central bank.

"Interest rates are the mother and father of all evil", said Erdogan, mentioning also a "foreign conspiracy" to harm Turkey's economy ahead of elections.

"Comments from the Turkish president raise the possibility that discretionary policymaking and policy predictability will come under pressure after June's elections", Fitch stated on Tuesday.

"Turkey's economy grew 7.4 percent past year and is still maintaining a growth trend at this level".