ISTANBUL: The Turkish lira weakened for a fifth consecutive day on Friday, further eroding the big gains it made a week earlier as investors continued to fret about the country’s unorthodox monetary policy and rising inflation.
The lira stood at 13.3 against the dollar in thin trade at 0806 GMT, 0.6% weaker than Thursday’s close and down 20% from the end of last week.
Turks’ earnings have been eroded in recent months by the slide in the lira, though it rebounded from 18.4 to 10.25 last week after the introduction of a state scheme to protect local deposits from depreciation losses versus hard currencies.
Finance Minister Nureddin Nebati said this week that Turks’ dollar holdings have since fallen, but official data on Thursday showed local holdings of hard currencies soared to a record $238.97 billion last week.
At the same time the central bank’s net foreign currency holdings – its effective buffer against financial crisis – plunged to nearly a two-decade low.
The currency crisis was triggered by the central bank’s aggressive interest rate cuts, amounting to 500 basis points since September, carried out under pressure from President Tayyip Erdogan as part of a bid to boost credit and exports.
Economists have said the easing is reckless, given that inflation has risen above 21% and is expected to soar beyond 30% this month and in the months ahead due to the lira depreciation.
