TRY continues to weaken, despite TCMB interest rate hike

TRY continues to weaken, despite TCMB interest rate hike

Shafaq News / The Turkish lira (TRY) depreciated further on Friday, reaching 27.16 TRY per US dollar.

TRY continues to remain significantly down by approximately 31% against the dollar this year, making it one of the worst-performing currencies among its peers in emerging markets.

This comes after the Turkish central bank (TCMB) raised interest rates to 30%, but the increase failed to ease investor concerns that monetary policymakers were not doing enough to contain inflation.

The interest rate hike was almost in line with expectations, but some investors had hoped for a stronger increase amid signs of Turkish inflation returning to higher levels.

However, TRY's weakness makes imports more expensive and poses a challenge for President Recep Tayyip Erdoğan's new economic team, which had been cautiously signaling a return to more conventional monetary policy since his re-election in May.

The decline of TRY is driven by a multitude of factors. Persistent high inflation rates have steadily eroded the currency's purchasing power, leading to a lack of confidence among investors and foreign exchange traders.

Furthermore, inconsistent and unconventional monetary policies, especially under President Erdoğan, have added to TRY's instability, with concerns that TCMB may not be taking sufficient measures to combat inflation.

Geopolitical tensions and diplomatic disputes with trading partners have also contributed to the currency's woes, discouraging foreign investment and negatively affecting its exchange rate.

External factors, such as changes in US interest rates and global economic conditions, play a significant role, as emerging market currencies like TRY are sensitive to external shocks.

Additionally, Turkey's persistent current account deficit and structural economic problems, including high levels of debt and overreliance on specific sectors, have further weakened TRY and its economic prospects.

Collectively, these issues have eroded confidence in the currency, leading to its depreciation against major international currencies like the US dollar.

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