Investing.com – Tuesday’s trading looks set to be historic for one of the most important emerging currencies of all time.
And moments ago, a new record low was seen, the lowest ever for the Turkish lira against.
The Turkish lira fell during those moments of writing the report to levels of 9.0388 lira / dollar, expanding its losses by more than 20% since the beginning of the year.
While the lira is declining against the dollar during those moments by more than 0.4%, and the lira is heading to extend its losses.
Before the end of trading on Monday, the lira had already broken the levels of 9 pounds against the dollar, but it succeeded in reducing its losses to close at levels of 8.9890 pounds / dollars.
While the lira opened trading today, Tuesday, at levels of 9 lira / dollar, to extend its losses down to the current levels, perhaps moving towards new low levels that it did not expect to witness before.
Yesterday, Monday, the Turkish lira received new statements from the central governor, which raised the ire and concerns of investors about the intention of the Turkish Central Bank to move towards the unexpected rate cut again.
Turkey’s central bank governor Shihab Kavcioglu said on Monday it was a mistake to link the lira’s recent depreciation to the bank’s cut in its key interest rate by 100 basis points to 18% in September.
Answering questions from lawmakers in the Turkish parliament’s Planning and Budget Committee, Kavcioglu said the rate cut was not a surprise and that the central bank had not neglected its duties.
Although the Turkish governor believes that the interest rate cut was not surprising, all market experts agreed that the cut was not expected, as an opinion poll before the decision revealed expectations of the Turkish Central Bank towards stabilization.
The Turkish lira may be subjected to further decline amid expectations of a rise in the dollar, which is trading near its highest levels in a year and increasing, coinciding with the anticipation of some important data.
US Job Opportunities Report (JOLTs) (August) Tuesday, October 13th
The government’s general budget (September) on Friday, October 15
Markets view the interest surprise as a negative surprise, as the unexpected drop in the interest rate underscores the fragility of the Turkish Central Bank’s credibility, which continues to weigh on the lira.
However, the risks of extended weakness in the US dollar due to the mood can be seen as a bit of a rescue for the lira bulls at the moment.
The MUFG Corporation of the Bank of Tokyo-Mitsubishi UFG believes that the Turkish lira will continue to decline to 9.55 Turkish liras per dollar within a year from now, and will fall during the fourth quarter to 9.0500 Turkish liras per dollar.
Societe Generale, Barclays, JP Morgan and Goldman Sachs (NYSE:) predicted further rate cuts in the coming months.
Data on Monday showed Turkey’s inflation rose slightly less than expected to 19.58% y/y in September, the highest level since March 2019, taking real yields further into losses after the central bank cut its interest rate to 18%.
Annual inflation in Turkey had already risen to more than the interest rate of 19.25% in August before the cut, and had reached 18.95% in July and the official inflation target is 5%.
The Turkish Central decided to cut the interest rate by 100 basis points on repurchases, “repo” for a week, to 18%, and 23 economists included in a survey all expected the Turkish Central Bank to keep the basic interest rate at 19% due to the rise in consumer prices.
The decision came as a sign that CBE policymakers are giving in to Turkish President Recep Tayyip Erdogan’s demands to lower borrowing costs, and the move also threatens to undermine investor confidence in state assets while eroding the real return on the lira.
Figures from the Treasury and Finance Ministry showed that the Turkish government’s debt rose by 109% during the last 3 years since the transition to the presidential system.
Positive data.. Tweet out of tune
Despite the negative news about inflation and its volume and the collapse of the Turkish currency and its reaching a negative record level, this did not prevent the Turkish economy from achieving good results in terms of retail sales data released today.
Al-Turki recorded a growth of 13.8%, while it grew by 0.3%, and the volume of retail sales growth reached 15%.