Turkish Lira hits new record low after Fitch’s statement

ISTANBUL

The Turkish Lira has slid to a fresh historic low of 4.66 against the dollar following a statement from the credit rating agency Fitch on May 22.

“Comments from the Turkish president raise the possibility that discretionary policymaking and policy predictability will come under pressure after June’s elections,” Fitch stated, referring to President Recep Tayyip Erdoğan’s eyebrow-raising remarks in London last week.

Speaking to investors, Erdoğan repeated his unorthodox view that interest rates should be cut, despite high inflation, while vowing to take more responsibility for monetary policy if he wins the June 24 snap presidential election.

“Greater erosion of monetary policy independence would put further pressure on Turkey’s sovereign credit profile, particularly if it contributed to serious external financing stresses and a deterioration in the macroeconomic environment, or undermined wider economic policymaking credibility and the country’s business environment,” Fitch’s statement added.

Following the statement the lira dropped as low as 4.6608 before bouncing back to 4.63. It traded at 5.49 against the euro and 6.25 against the sterling.

The lira has fallen some 17 percent this year amid concerns about the Central Bank’s inability to rein in double-digit inflation.