Turkey’s lira slips to record low after earthquake

Borsa Istanbul announced a temporary halt to transactions in shares of several companies in the earthquake zone.

Emerging markets are under pressure more widely, with currencies and stocks across the developing world feeling the pain from a sharp dollar rally on Friday in the wake of a strong US jobs report, suggesting the Federal Reserve could stay hawkish for longer.

But Turkey is feeling additional strain.

Consequential election

Turks beset for years by soaring inflation and currency crashes will probably head to the polls in May for presidential and parliamentary elections — perhaps the most consequential in the century-long history of the republic.

Many international investors have quit in recent years amid recurring market turmoil and Ankara’s embrace of unorthodox economic and monetary policies, including cutting interest rates in the face of soaring inflation.

Geopolitical tensions have been on the rise again recently, with Washington warning Ankara to be more active in preventing the export to Russia of chemicals, microchips and other products that can be used in Moscow’s war effort in Ukraine.

Recent inflation data also raised concerns, said Tatha Ghose, a foreign exchange analyst at Commerzbank, pointing to Friday’s reading of 58% annual inflation in January — well above forecasts despite a favourable base effect.

“Last week’s Turkish CPI print turned out to be somewhat of a shocker, reigniting volatility in USD-TRY which had otherwise been conspicuously absent in recent months,” Ghose said.

“A new window of FX volatility could be around the corner.”

Reuters