Lira plunges 7% to record as state lenders pull out of defense

(Bloomberg) – The Turkish lira plunged the most in more than a year on Wednesday as traders said state lenders halted dollar sales to defend it, a sign that the government’s new economic administration gives in to costly interventions.

Bloomberg’s Most Read

The currency fell 7.1% to 23.1616 to the dollar at 10:15 a.m. in Istanbul, weakening for a 12th straight day.

President Recep Tayyip Erdogan’s appointment of former Merrill Lynch strategist Mehmet Simsek as Treasury and Finance Minister in his new administration has raised hopes of a return to more orthodox economic policy with reduced government intervention. state of the markets. Since the second round of the Turkish elections on May 28, the lira has depreciated by more than 12% against the greenback.

Turkish state banks do not comment on their interventions in the foreign exchange market. A former governor of Turkey’s central bank said in 2020 that government-owned lenders were transacting within regulatory limits and could continue to be active in the foreign exchange market.

Analysts at Goldman Sachs Group Inc. recently upgraded their forecast for the dollar-pound pair, citing increased pressure on the currency. The bank sees the lira depreciating to 28 to the dollar in 12 months, from a previous projection of 22, according to a June 3 report.

READ MORE: Erdogan’s guy on Wall Street is back to replenish shattered vaults

Inflows from Japanese retail investors may have contributed to the currency’s slump on Wednesday morning, Fujitomo Securities chief technical analyst Tetsuya Yamaguchi said. “As the Turkish lira continued to weaken, stop-losses may have been triggered in the lira and yen market,” he said, noting increased volumes in yen trading. -read.

–With the help of Yumi Teso.

(Markets update.)

Bloomberg Businessweek’s Most Read

©2023 Bloomberg LP

Leave a Comment