Turkish Lira weakens beyond psychological barrier of 3 to dollar for first time

ANKARA - Reuters

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Turkey’s Lira, already at record lows, fell more than 1.5 percent on Aug. 20, briefly weakening beyond the psychological barrier of 3 to the dollar for the first time on a combination of political uncertainty and rising militant violence.

Besides, Turkey’s election commission has proposed that any snap parliamentary election should be held on Nov. 1, officials of the ruling Justice and Development Party (AKP) on Aug. 20, reinforcing the sense that a re-vote is inevitable after June’s poll yielded no working majority.

Prime Minister Ahmet Davutoğlu formally gave up its attempt to find a junior coalition partner on Aug. 18, more than two months after the AKP lost its overall majority for the first time since coming to power in 2002.

If, as now seems likely, no one else can form a coalition by Aug. 23, President Recep Tayyip Erdoğan is very likely to call a new election.

AKP officials said the High Election Board had proposed Nov. 1 as the date. But even that failed to assuage market worries about the $870 billion economy.

“A coalition would have been good for investor confidence, but now we have more uncertainty and I don’t think the result will change with new elections,” said Vedat Mizrahi, a managing director at financial services firm Ünlü & Co.

“It is really tough right now. There is almost no foreign institutional investor interest in Turkey.”

The lira was 1.6 percent weaker at 2.9745 to the dollar at 1100 GMT, and is now down over 20 percent against the dollar this year, making it one of the worst performing currencies among its emerging market peers. 

“We’re getting poorer by the day,” said 44-year-old elementary school teacher Nevin, who was shopping for groceries at a supermarket in central Ankara. “Now they’re going to knock on our doors and ask for our votes? How dare they? Shameless politicians.”

Erdoğan, founder of the AKP, could still in theory ask the main opposition Republican People’s Party (CHP) to try to form a government.

However, the CHP has shown little sign of being able to assemble a majority, and local media quoted Erdogan as telling a meeting of village administrators that he would not “waste time” with those who did not know the address of the presidential palace, an apparent reference to the head of the CHP.

Instead, Erdoğan has indicated that he will summon an interim “election cabinet” to lead Turkey to a new election.

Investors looking to the Central Bank for an independent steadying hand have been disappointed.
The Bank declined to raise interest rates at its monthly policy meeting on Aug. 18.