Turkish lira sinks to record low amid concern about tension with the US

A lower growth target goes to the heart of Erdogan’s dispute with the International Monetary Fund (IMF) and others warning that the Middle East’s largest economy may have overheated.

Early Friday Erdogan called on Turks not to panic, according to state-run Anadolu Agency. “Don’t forget this: if they have got dollars, we have got our people, our right, our Allah,” he was cited as saying.

Erdogan rejects the notion that slower growth is the answer. He is a fierce opponent of higher interest rates, and backed a wave of fiscal stimulus in the run-up to his re-election in June. He also prides himself on having freed Turkey from the “tutelage” of the Washington-based lender.

“We are entering into a balance-of-payment crisis here,” said Cristian Maggio, head of emerging market strategy at TD Securities in London. “It won’t stop unless the central bank steps in and hikes big time.”

Turkey’s benchmark one-week repo rate is now 17.75%. Maggio said it needs to rise to 30% to stem the lira’s rout — if not in one move, then in as many as four smaller increases. The central bank is next scheduled to meet on September 13.

The lira may slide another 5%-10% before recovering to 5 lira to the dollar by the end of the year, according to a report from ABN Amro. The currency has lost more than 30% of its value so far this year.

Bloomberg

Source: businesslive.co.za