Turkish lira slides 1% vs dollar, unorthodox policies questioned

Turkish lira slides 1% vs dollar, unorthodox policies questioned

Shafaq News/ Turkey's lira tumbled to beyond 16.1 against the dollar on Tuesday, bringing its losses this year to 18% as investors increasingly questioned the sustainability of the country's unorthodox economic policies.

Losses this month have pushed the major emerging market currency back towards the record lows of 18.4 against the dollar, which it hit in December after a series of interest rate cuts, before ending the year 44% weaker.

On Tuesday morning, the lira slid as far as 16.155 against the U.S. currency, 1.2% weaker than Monday's close. It stood at 16.12 by 0926 GMT.

The currency's decline has fuelled a surge in annual inflation, which reached 70% in April.

"There is no 'anchor' to convince markets that inflation will strictly converge back to the target level over the medium-term," Commerzbank said in a note.

"In the absence of targeting, there is no upper-bound to this process. The lira may appear stable for now, but fundamentals are surely deteriorating," it added.

The lira was relatively stable early in the year, largely thanks to a government scheme that protects lira deposits against depreciation, as well as the central bank meeting the market's forex needs through its reserves.

But the war in Ukraine began to exert pressure on the lira in March as Western sanctions on Russia sent energy prices soaring, pushing up Turkey's already hefty import bill and fuelling inflation.

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