Turkey's lira is back in the spotlight. After two months of stability, the currency is testing the 7-per-dollar threshold and tumbling to record lows versus the euro, rekindling memories of the August 2018 lira meltdown.
LONDON - Turkey’s lira is back in the spotlight. After two months of stability, the currency is testing the 7-per-dollar threshold and tumbling to record lows versus the euro, rekindling memories of the August 2018 lira meltdown.
Speaking on Wednesday, Central Bank Governor Murat Uysal downplayed concerns about the bank’s depleted FX reserves, which he said would naturally fluctuate during a pandemic. He did not address a drop of as much as 1.8% in the currency this week that could put more pressure on that buffer.It takes firepower to support a currency. Just how much of that the central bank has left has come into focus.
“Given the pace of reserve burn this year, we extrapolate that the CBRT will have used all of its reported gross reserves by late summer/early autumn,” said Cristian Maggio at TD Securities.An aggressive year-long easing cycle has pushed real interest rates negative, raising questions for investors about being adequately compensated in times of heightened stress.
The government will post a record budget deficit of 5% of gross domestic product, S&P Global predicts.
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