December 8, 2022

The Turkish Lira slumped to a Record Low

Lira SymbolThe Turkish Lira slumped to a record low this week against the US $ and the € after the announcement of current account deficit data that fueled concerns over the country’s financing vulnerabilities. The Turkish currency sank on 14th January  to a record low against the €, hitting the psychologically key level of three Lira to the €.

The Istanbul stock market also lost ground, sliding 1.32 percent to 67,221.75 points.

The slump followed the Central Bank’s announcement that Turkey’s current account deficit had risen to $3.9 billion in November from $2.9 billion the previous month.

The expansion of the deficit was stemmed from the increase in the foreign trade and income deficits.

Stock Market“The external deficit that Turkey can sustain is much lower now. Therefore, we foresee Turkey’s external deficits to continue to shrink in the forthcoming period, on account of the weakness of the Turkish lira and a likely weakening of the domestic demand as well as the recovery of the global economy,” Finansbank said.

The stress on financial markets also came amid continuing investor concern about Turkey’s external financial position.
“Turkey is currently facing a dangerous combination of large external imbalances, higher global yields and escalated domestic political tensions,” Finansbank also said in a commentary.

The currency plunged 17 percent last year because of a worsening global environment for emerging market assets, compounded by Turkey’s big external deficits and a corruption scandal which erupted in mid-December.

Source: Hurriyet Daily

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