Turkey Struggles to Protect Its Lira
Seconds later, in a dingy alley of Istanbul’s vast Grand Bazaar, several dozen men with mobile phones pressed to their ears began gesturing and shouting loudly.
They were currency traders, who every day buy and sell tens of millions of dollars, euros and Turkish liras in a narrow space that is sheltered by a sagging blue-striped canopy and furnished with an old refrigerator and a few plastic stools.
The traders had been noisily plying their craft since early morning. But when they learned from the television screens inside the nearby gold shops that the Dow Jones industrial average had opened higher in New York, the trading turned even more tumultuous. The dealers locked in or unwound their bets on which direction the dollar would head in relation to the Turkish lira.
The frenzy was a demonstration of how the value of Turkey’s money — which has broad implications for the national economy — is determined largely by events beyond the country’s control. And lately the lira has been alarmingly weak.
The currency has lost a third of its value against the dollar, since the Federal Reserve in Washington began making noises last May about cutting back on its stimulus program, prompting investors to move their money from risky emerging markets to the United States in anticipation of higher interest rates there. More recently, the steady exit of foreign money has been more of a stampede, with about half the lira’s decline occurring since mid-December, as political turmoil engulfed the government of Prime Minister Recep Tayyip Erdogan and violence raged in neighboring Syria and Iraq….