On Tuesday, the Turkish lira registered the most significant decline in comparison to all major global currencies. The Turkish national currency depreciated by 1.6%, after inflation accelerated way more than expected in December and, last but not least, the attack from Reina affected the investor’s confidence, reports Bloomberg and Reuters.
Tuesday morning, a dollar was trading for 3.60 pounds, a record low for the currency from Turkey. Around 02.16 P.M., in Istanbul, a US dollar was traded in Istanbul for 3,589 liras, so in the last 12 months the Turkish lira depreciated by 19%.
The annual inflation rate was 8.53% in December, way above the initial estimations and 3.5 percentage points above the inflation target of the Central Bank of Turkey announced on Tuesday Statistical Office.
Increasing security risks has been accompanied by the deteriorated economic situation, including the decline in GDP in the third quarter of 2016 and the decreased consumer confidence from December, which reached a record low.
The armed attack that took place on New Year’s night in a nightclub in Istanbul left behind 39 deaths and 69 wounded.
The FOREX market is waiting for indications from the Central Bank of Turkey, who should take seriously the effects of the inflation.
Until we see a significant tightening of the Turkish monetary policy, similar to the one adopted at the beginning of 2015, the Turkish lira will continue to weaken due to the negative news, said analyst Henrik Gullberg, from Nomura.
After accelerating inflation, the pressures on the Turkish Central Bank will probably amplify.
The Turkish national currency achieved some historic new lows every single week from the last four months and mostly because of the political uncertainty.
Also, the global markets are worried that President Recep Erdogan’s repeated interventions in the economic field will generate a new financial crisis.