Turkish Central Bank has many instruments to combat ‘speculative’ lira moves: Minister

ANKARA

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The Central Bank has many instruments to counter “speculative” moves around the struggling Turkish Lira and its hands are not bound by political pressure, Economy Minister Nihat Zeybekci claimed on Jan. 13. 

“In the period ahead we will see the lira returning to a normal trend as the hope fades away in the speculative moves,” Zeybekci told state-run Anadolu Agency on the lira, which has been the world’s worst performing currency so far in 2017.

“When we look at what the public sector, the private sector, lenders and foreign funds have in their hands, we can comfortably say Turkey has many more assets than it actually needs to meet its obligations,” he added. 

Zeybekci said he believed the exchange rate would not create a risk for Turkey given steps taken by the Central Bank.

“The hands of the Central Bank are not tied,” he added. 

Deputy Prime Minister Mehmet Şimşek had also stated on Twitter on Jan. 12 that the Bank’s hands were not tied by the government’s strong objection to rising interest rates.

“The run on the lira is a glass half empty stance. Even with occasional delays, the Central Bank has acted in the past. It should and will act again,” Şimşek said, adding that the dust would settle on the lira rout and the fundamentals of the Turkish economy were what ultimately mattered. 

The lira has rebounded slightly in the last two trading days as dollar weakness helped it move off record lows and the Central Bank canceled its weekly repo sales, after seeing its biggest plunge since the aftermath of a failed coup attempt last July.

The lira was trading at 3.80 early on Jan. 13 after closing at 3.76 on Jan. 12, according to Reuters data. The currency hit a record low of 3.94 on Jan. 11 and has lost almost a quarter of its value in the six months.
In a speech on Jan. 12, President Recep Tayyip Erdoğan repeated his call on Turks to sell their foreign currency, urging a “national mobilization against speculators.” 

“There is no difference in terms of goals between the terrorist with a gun in his hand and a terrorist with forex in his hands,” Erdoğan said in a speech in Ankara.


Fitch’s decision

Turkey’s sovereign credit rating is at risk of being downgraded at the end of this month and a Fitch Ratings assessment team is currently working in Turkey, broadcaster Bloomberg HT reported Fitch’s James McCormack as saying on Jan. 12, creating additional pressure over the lira. 

Fitch is due to review its BBB- sovereign rating, the lowest investment grade, on Jan. 27. It already has Turkey on negative outlook. The two other main rating agencies, Moody’s and Standard & Poor’s, rate Turkey below investment grade.

Zeybekci admitted that it is not possible to ignore the decisions by credit rating agencies. 

“Beyond them, we have things to do. We will keep making reforms, growing and improving our investment climate,” he said, noting that Turkey’s 2016 growth rate would likely come in at around 3 percent thanks to the positive contribution by exports and domestic consumption in the last quarter.