Turkish lira languishes near record low

If Turkey’s central bank hoped for a dramatic turnaround in the lira currency after raising interest rates for the first time in nearly three years, then it has been sorely disappointed.
The currency briefly firmed following Thursday’s bigger-than-expected hike, but soon lost steam. By early Friday, it had touched another record low and was firmly on track for a 10 percent decline this month — its biggest fall since late 2008.
Like other emerging market currencies, the lira has been battered by the dollar following Donald Trump’s victory in the US election. 
But it is also plagued by domestic concerns, particularly security worries after a failed coup.
“The rate hike is no game-changing positive for (the lira). The medium-term outlook is still weak,” analysts at Morgan Stanley said in a note to clients. 
“The domestic conditions are not in place for the currency to turn around on a sustained basis.”
To try to stem the lira’s slide, the central bank raised its benchmark one-week repo rate to 8 percent from 7.5 percent, twice the increase forecast by 12 out of 19 analysts in a Reuters poll. It also lifted its overnight lending rate — the highest of the multiple rates it uses to set policy — to 8.5 percent from 8.25 percent.
But investors have been worried about the rule of law since the failed coup, when rogue soldiers commandeered tanks and warplanes.
More than 125,000 soldiers, judges, teachers and civil servants have since been sacked or suspended while about 36,000 are in jail awaiting trial. Turkey’s Western allies worry that President Tayyip Erdogan is using the coup as a pretext to crack down on dissent, something he denies.

Source: Arab News