Turkish lira holds firm after slide on inflation worries

A money changer counts Turkish lira bills at a currency exchange office in Istanbul, Turkey, December 16, 2014. REUTERS/Murad Sezer

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ISTANBUL, Jan 5 (Reuters) – Turkey’s lira firmed slightly on Wednesday, trimming losses a day earlier as investors weighed up the impact of a surge in inflation to a 19-year peak after last year’s plunge in the currency’s value.

The lira firmed as much as 1.3% to 13.275 in early trade but gave up most of those gains to reach 13.42 by 0742 GMT. On Tuesday it weakened 3.6% to close at 13.45.

In 2021, the Turkish currency suffered its worst year since Erdogan’s AK Party came to power in 2002, tumbling 44%. It hit a record low of 18.4 two weeks ago before rebounding after the government unveiled a deposit-protection scheme.

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The lira slide and a series of administered price rises – including for utilities and wages – are forecast by economists to push inflation higher this year after data on Monday showed the annual rate reached 36.1% in December.

Speaking to his ruling AK Party on Tuesday, Erdogan said he would not abandon Turks to “extreme” price hikes and volatile exchange rates.

“God willing, we have left the worst behind us. From now on, it is time to reap the benefits of our efforts, to show our people that we are approaching our goals.”

Under pressure from Erdogan, who overhauled the central bank’s leadership last year, the bank has slashed its policy rate by 500 basis points to 14% since September.

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Reporting by Daren Butler
Editing by Ece Toksabay

Our Standards: The Thomson Reuters Trust Principles.

source: reuters.com