Turkey lira drops sharply as investors warn of ‘bad rotation’


Turkey’s currency plummeted sharply on Friday as investors noted a sharp rise in interest rates over the previous day, which some analysts say has led to the country’s economic woes.

The lira also rose to business in the morning due to a sharp fall, but continued to sell until the afternoon of London. The currency recently sold about 2 percent at TL11.32 per dollar.

The rate has fallen sharply by 30 percent this year after investors lost confidence in fiscal governments against inflation that rose to nearly 20 percent in October. Turkey’s central bank, led by Governor Sahap Kavcioglu, has cut prices by 19 percent since the beginning of September – under pressure from President Recep Tayyip Erdogan – despite rising prices.

“If money loses one-third of its value in the FX market within three months, then it is worth mentioning the problem,” said Ulrich Leuchtmann, FX’s chief research officer at Commerzbank.

Advertisers said there was no hope that the lira would recover unless the central bank was able to free itself from Erdogan’s unconventional belief that interest rates were raised, rather than slowing inflation.

“As an investor, when you see an explosion of money it always tries to take the other side,” said Viktor Szabo, history manager of Aberdeen Standard Investments. “But this is not the case. If you had a definite policy change then maybe, but there is no sign of it. “

While the 15 per cent interest rate may be attractive to starving foreign investors, the annual expectation could be “eliminated within a few weeks”, according to the depreciation rate, Szabo said.

Erdogan, who resigned from Kavcioglu’s prestigious career in March, has stepped up its low-cost rental campaign in recent months in an effort to boost growth as he struggles with popularity. But Thursday’s cut, which could be followed by another reduction in December, should be “unstable”, according to Goldman Sachs experts.

“Reducing policy could translate faster into inflation, rather than growth,” he said, adding that real interest rates – once inflation is considered – increase the risk that Turkish families will start transferring more of their dollars to dollars.

“Eventually they will have to climb,” says Timothy Ash of BlueBay Asset Management. “Otherwise you could be that the price hike is too high you will see locals selling lira, you could be at risk of rising and falling prices.”



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