Turkey: Turkish lira falls to record-low amid weak fundamentals and strong US dollar
January 7, 2015
The Turkish lira (TRY) has weakened sharply against the U.S. dollar in recent weeks. On 15 December, the TRY reached an all-time low against the greenback, trading at 2.38 TRY per USD. This was 6.6% weaker than the level observed on the same day of the previous month. On an annual basis, the Turkish lira lost 16.4% against the dollar. The lira recovered some of the lost ground recently, trading at 2.32 TRY per USD on 7 January.
The TRY has come under pressure lately due to both domestic and external factors. Investors are concerned about the country’s weak economic fundamentals, such as slowing economic activity and a persistently-large current account deficit, as well as about rising geopolitical tensions at the southern border and domestic political risks. On the external side, a selloff in emerging market currencies driven by speculation that the United States would raise interest rates has also played a role in the weakening of the lira.
Author: Ricardo Aceves, Senior Economist