ISLAMABAD – The Turkish lira tumbled on Wednesday to its lowest valueagainst the US dollar in two weeks, despite Ankara s attempts to reassureinvestors after Moody s downgraded its credit ratings on 20 Turkishfinancial institutions.
The currency had already been hit by concerns over monetary policy underPresident Recep Tayyip Erdogan but plunged further this month after apublic spat with the United States.
The lira lost nearly a quarter of its value against the dollar in the pastmonth and over 40 percent since January.
The lira was trading at 6.4 to the dollar around 1430 GMT on Wednesday, aloss of around two percent. The lira lost a similar percentage against theeuro, trading at 7.5.
After last week s long public holiday, the lira fell further on Monday,with economists warning the fears over the health of the Turkish economyremain.
Ratings agency Moody s on Tuesday downgraded 14 banks by one notch and fourothers — including major lenders Denizbank and Is Bank — by two notches.
The Turkish central bank earlier Wednesday reiterated that it would providebanks with “all the liquidity that they needed” as it doubled theirborrowing limits for overnight transactions from levels before August 13,effective from Wednesday.
The Turkish statistics office also announced that the economic confidenceindex fell to 83.9 in August, down from 92.2 in July and 104.9 in January.The reading is the lowest since March 2009.
New data also showed imports decreased by 9.4 percent compared with July2017.
With inflation running at close to 16 percent and the current accountdeficit widening but the central bank refusing to tighten monetary policy,investors have yet to be persuaded by Ankara s helmsmanship of the economy.
And the spat with the United States over a detained American pastorprompted Washington to slap sanctions on two Turkish ministers and doubletariffs on aluminium and steel imports from Turkey, leading to furthermisery for the lira.
Earlier in August, the lira topped seven to the dollar for the first timeever.
Washington has threatened to hit Ankara with further sanctions if pastorAndrew Brunson is not released from house arrest, with President DonaldTrump insisting Brunson is innocent.
Turkish Treasury and Finance Minister Berat Albayrak accused the US of”launching a campaign against the Turkish economy” during a televised pressconference in Ankara.
Albayrak — also Erdogan s son-in-law — has sought to assuage investorsconcerns by insisting that his medium term plan to be announced early nextmonth will tackle the issues bedevilling the Turkish economy.
He insisted that Turkey was committed to budgetary discipline as well asreducing the current account deficit.
“God willing, 2019 will be a very strong year for Turkey s fight againstinflation,” he said. The latest inflation data for August will be publishedon Monday.
Jason Tuvey, senior emerging markets economist at London-based CapitalEconomics said the latest signs showed that higher inflation coupled withthe severe tightening of financial conditions is “filtering through into anabrupt slowdown in economic growth”. – APP