Turkish lira slips 5%, eyes on surging inflation

A US dollar banknote is seen next to Turkish lira banknotes in this illustration taken in Istanbul, Turkey on November 23, 2021. REUTERS / Murad Sezer

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ISTANBUL, Jan. 3 (Reuters) – The Turkish lira fell 5% on Monday after experiencing its worst year in 2021 since President Tayyip Erdogan took office nearly two decades ago, as concerns persist over the soaring inflation and unorthodox monetary policy.

The lira weakened to 13.92 against the dollar after a close of 13.1875 on Friday.

Market attention has focused on December’s inflation figures, due for release at 07:00 GMT, after data over the weekend showed retail prices in Istanbul jumped by 9, 65% month on month in December for an annual increase of 34.18%. Read more

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Annual inflation is expected to hit 30.6% in December, according to a Reuters poll, topping 30% for the first time since 2003. read more

The pound was by far the worst performing in emerging markets in 2021, as well as in recent years, and lost 44% of its value against the US dollar during the year. It has weakened by 19% last week alone.

The central bank has cut its policy rate by 500 basis points since September, under pressure from Erdogan as he pushed for a “new economic agenda” focused on credit and exports despite the collapse of the pound and the rise of inflation.

To curb the weakness of the pound, Erdogan three weeks ago unveiled a program in which the state protects converted local deposits from losses against hard currencies, triggering a sharp 50% rise in the pound with backing from the central bank.

But the pound then sank again last week, prompting a call on Friday from Erdogan – whose opinion poll scores are dropping ahead of the 2023 election – for the Turks to keep all their savings in pounds and transfer gold in banks.

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Written by Daren Butler; Editing by Jonathan Spicer

Our Standards: Thomson Reuters Trust Principles.

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