- Title: Turkish lira drops to record low as political, economic worries weigh
- Date: 2nd December 2016
- Summary: ISTANBUL, TURKEY (DECEMBER 2, 2016) (REUTERS) VARIOUS OF FERRIES SAILING AT SEA VARIOUS OF PEDESTRIANS CROSSING STREET VARIOUS OF PEOPLE WALKING PAST EXCHANGE OFFICES AT ISTANBUL'S GRAND BAZAAR ELECTRONIC EXCHANGE RATE BOARD SHOWING CURRENCIES ECONOMIST AT IS INVESTMENT (TURKISH INVESTMENT BANK), MUAMMER KOMURCUOGLU, WALKING PAST (SOUNDBITE) (English) ECONOMIST AT IS INVESTMENT, MUAMMER KOMURCUOGLU, SAYING: "Actually our expectation is the depreciation of the lira will continue in the next 12 months. For the last month of the year we expect the lira to linger around 3.50 levels. It all depends actually on the international developments and you know, the evaluation of the domestic uncertainties. They will all play roles in the depreciation of the lira. We expect the level will continue around 3.5." MORE OF PEOPLE WALKING PAST EXCHANGE OFFICE MORE OF ELECTRONIC EXCHANGE RATE BOARDS (SOUNDBITE) (English) ECONOMIST AT IS INVESTMENT, MUAMMER KOMURCUOGLU, SAYING: "For the rest of the year, we don't expect central bank to move with an urgent interest rate meeting. Possibly, the bank will increase the policy rate in the next meeting but this will not be higher than 50 basis points. In this regard we don't expect central bank to move strongly."
- Embargoed: 17th December 2016 11:45
- Keywords: Turkey lira currency Tayyip Erdogan
- Location: ANKARA AND ISTANBUL, TURKEY
- City: ANKARA AND ISTANBUL, TURKEY
- Country: Turkey
- Reuters ID: LVA0015B6YSUL
- Aspect Ratio: 16:9
- Story Text: The Turkish lira hit a new low against the dollar on Friday (December 2) as worries about the country's political and economic outlook and concerns about the impact of rising oil prices on energy imports weighed on sentiment, traders said.
The lira dropped another 1.5 percent to a record 3.4920 as oil swept to a six-week high after OPEC agreed to cut crude output to help clear a glut.
Muammer Komurcuoglu, IS Investment economist expects Turkish currency to linger around 3.50 level.
"It all depends actually on the international developments and you know, the evaluation of the domestic uncertainties. They will all play roles in the depreciation of the lira," Komurcuoglu said.
The lira weakened 10 percent to the dollar in November - its worst month since the 2008 financial crisis - hit by a resurgent U.S. dollar and concern about a widening crackdown after Turkey's failed July coup attempt.
President Tayyip Erdogan on Friday called on Turks to convert their foreign exchange into gold or the Turkish lira.
Despite president's repeated calls to lower borrowing costs, the central bank hiked interest rates for the first time in almost three years last week in a bid to stem the currency's decline. But the lira has continued to weaken.
An economic slowdown is also a source of concern and data on Thursday (December 1) painted a mixed picture.
The manufacturing Purchasing Managers' Index (PMI) slipped to 48.8 in November from 49.8 in October, according to the Istanbul Chamber of Industry and IHS Markit, pointing to a contraction in activity.
Meanwhile, Turkish exports rose 5 percent year-on-year in November to $11.95 billion and Istanbul retail prices rose 0.59 percent during the month, other data showed.
"We buy everything with dollars, but right now we cannot pass through the price hikes on customers," said Serdar Iyideli, a shopkeeper from Ankara.
"The prices are constantly changing. We cannot buy anything for the same price. Prices have changed in a week," added Yeliz, Ankara resident.
High food prices and lira's depreciation affect Turks daily lives and people hope the central bank will intervene in just before or in the new year.
Turkish government has said it will take measures to make it easier for state institutions to do transactions in lira rather than dollars, and has urged private businesses to do the same in an effort to shore up the currency.
Lira might also be affected by the ruling party's plans to present new constitutional change proposal to parliament next week.
A referendum on this reform could be held at the start of next summer.
Financial markets are concerned about the political consequences of the reform and are worried that a fifth national vote in just over three years, following local, presidential and two parliamentary elections, will distract policy makers from badly-needed reforms.
Investors have also expressed concern about the rule of law and the stability of Ankara's institutions as a result of a crackdown since the July 15 putsch, in which rogue soldiers killed more than 240 people. - Copyright Holder: REUTERS
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