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Turkish lira slides 5%, eyes on surging inflation

Category: Economy

Date: 2022-01-03T09:42:08+0000
Turkish lira slides 5%, eyes on surging inflation

Shafaq News / Turkey's lira tumbled 5% on Monday after suffering in 2021 its worst year since President Tayyip Erdogan came to power nearly two decades ago, with concern persisting over surging inflation and unorthodox monetary policy.

The lira weakened as far as 13.92 against the dollar from a close of 13.1875 on Friday.

Market attention was focused on December inflation figures, set for release at 0700 GMT, after data at the weekend showed retail prices in Istanbul jumped 9.65% month on month in December for an annual rise of 34.18%.

According to a Reuters poll, annual inflation is expected to have hit 30.6% in December, breaching the 30% level for the first time since 2003.

The lira was by far the worst performer in emerging markets in 2021, as well as in the last few years, and lost 44% of its value against the U.S. currency over the year. It weakened 19% last week alone.

The central bank has slashed its policy rate by 500 basis points since September, under pressure from Erdogan as he pushed a "new economic programme" focused on credit and exports despite the lira's collapse and rising inflation.

To curb the lira weakness, Erdogan unveiled a scheme three weeks ago in which the state protects converted local deposits from losses versus hard currencies, sparking a sharp 50% rally in the lira with support from the central bank.

But the lira then sank again last week, prompting a call on Friday from Erdogan - whose opinion poll ratings are sliding ahead of an election in 2023 - for Turks to keep all their savings in lira and shift gold into banks.

Source: Reuters

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