Turkish lira falls to record low under political pressure

ISTANBUL

The lira plummeted down to a record low of 2.1025 against the U.S. dollar after starting the day at 2.0914 amid an ongoing graft probe. REUTERS photo

The Turkish Lira weakened to 2.14 against the dollar and 2.91 against the Euro, hitting fresh records low under the ongoing political pressure.

Turkish financial markets have continued to slump on a second consecutive day, despite a promise from the Central Bank to support the lira.

The fall comes after the resignation of three Turkish ministers, one of whom called for Prime Minister Tayyip Erdoğan to follow suit.

In response to the escalating crisis, Erdogan announced a long-expected cabinet reshuffle and named 10 new ministers -- almost half of the cabinet. The renewed political crisis ended a brief reprieve for the lira.

After a Turkish prosecutor said he had been prevented from expanding a corruption investigation that has touched the heart of the government, the lira plummeted down to a fresh record low of 2.14 against the U.S. dollar after starting the day at 2.0914.

The lira also saw record low of 2.91 against the eurozone’s main currency.

The currency, which has been going through a shaky period for some time, was traded at $2.019 as of 11.40 a.m.

Turkey’s main stock index, BIST 100, also continued falling, with around 2 percent drop to nearly 64,750 points.

The index had plunged by 4.2 percent to 66,096.57 yesterday, adding to heavy losses from last week.

Ongoing Fed pressure

The central bank on Dec. 24 had made its most clear commitment yet to ramping up its support of the lira, promising to sell at least $6 billion in foreign currency by the end of January.

The currency had strengthened to 2.0650 following an announcement by the central bank.

Already under pressure this year in anticipation of the U.S. Federal Reserve’s decision this month to stem a flood of dollars that has boosted global emerging markets, the lira has been beaten down further by the row around the corruption probe.

As a leading emerging economy, Turkey has been one of the main beneficiaries of the Fed’s stimulus as US investors sought higher returns abroad.

Analysts say it does not have the currency reserves to defend the lira aggressively for long.

Turkey needs to import almost all of the oil it uses, which gives it one of the world’s largest current-account shortfalls and makes it heavily dependent on foreigners buying its stocks and bonds to bring in capital.