Turkish lira weakens further after Erdogan promises further rate cuts

A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Turkey, October 12, 2021. REUTERS/Cagla Gurdogan

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NEW YORK, June 7 (Reuters) – The Turkish lira fell 1.1% against the dollar on Tuesday to a record close low as concerns over creeping inflation were fueled by President Tayyip’s pledge Erdogan to continue cutting interest rates.

In a speech on Monday evening, Erdogan sought to downplay the soaring annual consumer prices, 73% last month, as one of many problems for the economy that should start to subside at the start of the month. next year. Read more

The lira closed at 16.765 to the dollar from a close of 16.58 on Monday. It has weakened more than 21% this year, following a 44% plunge in 2021, when it was hit by a series of unorthodox interest rate cuts despite high inflation.

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Early overnight trades saw the pound weaken further to 16.845 for Wednesday’s session.

The cost of securing exposure to Turkey’s sovereign debt rose, while the prices of its dollar-denominated bonds fell.

Five-year credit default swaps in Turkey closed above 730 basis points, at levels last seen during the 2008 global financial crisis, according to data from S&P Global.

Bond prices were down more than a cent for most issues, with the September 2027 bond down 1.1 cent to 96.79 and yielding 9.1%.

Speaking after a cabinet meeting, Erdogan said Turkey would not raise interest rates but rather continue to cut them in the face of high living costs.

He also redoubled his commitment to boost production, exports and employment with the low interest rate policy and promised a current account surplus that will eventually stabilize the currency and calm inflation.

Separately, the central bank said it sold $1.82 billion in foreign currency last month to state-owned companies, mainly energy importer Botas. Read more

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Reporting by Daren Butler, additional reporting by Rodrigo Campos; Editing by Jonathan Spicer and Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.

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