Turkish currency hits new low as fears grow over economic outlook

Turkish currency hits new low as fears grow over economic outlook

Erdogan, speaking at a Ramadan fast-breaking dinner late Wednesday, said the weak Turkish currency did not reflect the state of the country's economy.

The exchange rate of lira against dollar has fallen about 20 percent from 3.78 at the beginning of this year.

The sharp fall in the currency's value has come at a hugely sensitive time as Turkey heads to June 24 presidential and parliamentary elections where Erdogan is seeking a new mandate and a thumping parliamentary majority. We've fixed problems in the past, we can do it again."The lira fell as low as 4.8450 against the dollar early on Wednesday before recovering slightly, moving up to 4.628".

The rand strengthened more than 30c from its intraday low to R12.40 to the U.S. dollar after Turkey's central bank hiked interest rates by 300 basis points on Wednesday.

It dropped 5 percent against the dollar Wednesday, its biggest loss in almost a decade, before the country's Central Bank stepped in with an emergency meeting that reversed some of those losses.

Analysts will now await further reaction to see whether the central bank will be under pressure to introduce another rate increase at its next scheduled policy meeting on June 7. Its rate-setters, it said, had chose to implement a strong monetary tightening to support price stability.

The central bank interim meeting left the overnight borrowing rate unchanged at 7.25%, the overnight lending rate unchanged at 9.25% and the one-week repo rate unchanged at 8.0%.

The 300 basis points hike was largely in line with what economists said was needed and, in a hawkish statement, the central bank said it would continue to use "all instruments" to achieve price stability.

Rebutting government rhetoric that the money market and economy were in trouble due to conspiratorial foreign intervention, she said: "If we are under a financial and economic attack as the government claims, the biggest mistake to make is to remain indifferent to this attack".

Dragging on the Turkey market outlook, the lira currency has tumbled to record lows in recent weeks and weakened by more than 20% against the Dollars so far this year and depreciated 70% over the past five years.

Erdogan himself has spooked the markets by saying he plans a greater say in monetary policy - despite the nominal independence of the central bank - after the polls.

Erdogan said necessary measures would be taken to decrease the inflation rate and reduce the currency deficit soon after the elections.

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