The Turkish lira fell to a new low against the dollar on Friday, bringing losses this month to 3 percent due to growing concerns that President Recep Tayyip Erdogan’s policies have alienated foreign investors.
Erdogan he fired three senior central bank officials, including the governor, since March, has raised concerns that policymakers will not be able to withstand political pressure to lower borrowing costs to the detriment of the country’s double-digit inflation rate.
The lira traded up 8.6145 to the dollar on Friday, a drop of more than 13 percent since the beginning of the year. It marks the lowest level that the currency has touched during hours when the lira is actively exchanged.
“Things seem bleak, with macroeconomic and political situations becoming negative,” said Enver Erkan, an economist at Tera Securities in Istanbul. “The central bank cannot set the tone proactively, and there has been a divergence with other emerging market currencies on Turkey’s idiosyncratic dynamics.”
In an indication of the acid prospects of investors, the California Senate voted this week to ask the Public Employees Pension System and the Public Employees Pension System, two of the largest investors of world pensions, to enable school districts and cities to you chooset of investment vehicles owned or issued by Turkey.
The pressure to hunt was directed at punishing the government for refusing to recognize that killing and deportation until 1.5m Armenians during the last days of the Ottoman Empire was a genocide, said California Senator Anthony Portantino, who was one of the co-sponsors of the project. Turkey claims that Muslims and Christians died during the chaos of the First World War and the subsequent collapse of the Ottoman Empire.
S&P Global Ratings will announce its latest rating decision in Turkey later Friday. It has maintained the country’s rating at B +, below investment grade, since August 2018. All three major rating agencies, S&P, Fitch and Moody’s, classify Turkish debt as rubbish.
“It was the peak of the last balance of payments crisis, [and] it’s hard not to dispute that things have deteriorated further since then, ”said Timothy Ash, chief strategist at BlueBay Asset Management, referring to S & P’s latest rating actions.
Erdogan, who has a history of intervention in the central bank, abruptly fired the central bank governor in March after abruptly raising interest rates to lower inflation that now exceeds 17 percent. U the president installed Sahap Kavcioglu, a newspaper columnist who shares his unorthodox belief that high interest rates drive inflation, at the helm of the bank.
This week, Erdogan replaced him a second deputy governor of the central bank after firing a first immediately after Kavcioglu’s appointment. The central bank also replaced several directors, including heads of banking, research and statistics departments, on Thursday, Bloomberg said.