Turkish lira weakens 1 percent against dollar

The Turkish lira weakened around 1 percent against the dollar on Wednesday as emerging market currencies came under pressure ahead of a US interest rate decision and amid ongoing concerns about political influence over Turkish monetary policy.

The lira has lost around 18 percent against the dollar this year, making it one of the worst-performing emerging market currencies. It has been hit by concern about President Tayyip Erdogan’s influence over monetary policy and looming elections.

The Turkish currency stood at 4.6400 against the dollar at 1321 GMT, weakening from Tuesday’s close of 4.5950. It briefly touched a low of 4.6975 earlier in the day.

The US Federal Reserve is widely expected to raise rates for the second time this year on Wednesday after a move in March. Investors want to see the outlook for future monetary tightening amid ongoing economic expansion.

A combination of factors has impacted Turkey’s lira, BlueBay Asset Management strategist Timothy Ash said in a note, including meetings of the Fed and the European Central Bank and upcoming Islamic Eid holidays, which have dried up liquidity.

He said there was also concern that Erdogan, who has described interest rates as the “mother and father of all evil”, might want to reverse some of Turkey’s recent rate hikes.

“People are not convinced that if he (Erdogan) wins the elections he will not reverse the 500 bps in rate hikes and go back to unorthodoxy and/or deliver on his idea to get more involved in monetary policy, post-election,” Ash said. (RTRS)