Turkish lira crisis

  1. Lira falls after Turkey central bank governor dismissed

    Turkish Lira

    On Saturday,Turkish President Tayyip Erdogan dismissed central bank governor Murat Cetinkaya, causing the lira to fall 1.6% on Monday.

    While no official reason has been given for the sacking, there have been reports of disagreements over interest rates.

    Mr Erdogan had long called for interest rates to be lowered, describing them as the "mother and father of all evil", but Mr Cetinkaya had refused.

    Now investors are concerned about the central bank's independence and how political interference will affect monetary policy.

    "His removal speaks to Erdogan's insistence on imposing his diktats on monetary policy, and more broadly, it suggests tight presidential control of economic policies," said Phoenix Kalen, EM strategy director at Societe Generale.

  2. Lira still falling

    Turkish lira

    The Turkish lira is still falling - today it fell by 1%, after dropping 5% on Thursday, due to a return of liquidity to a key London market.

    Finance Minister Berat Albayrak told Turkish broadcaster NTV on Thursday that Turkish banks were providing billions of lira to foreign markets.

    He added that the normalisation in market conditions in both Turkey and London had begun.

    The Turkish liquidity squeeze pushed the London swap rate to a record 1,200% on Wednesday but it is now back to a more normal 27% today.

    Turkish President Tayyip Erdogan told young voters on Thursday that some banks were playing a game with the currency ahead of local elections on Sunday.

    Numerous reports this week suggested the Turkish government had ordered its banks to keep foreign investors from exiting lira trades ahead of the elections.

  3. Turkish lira under pressure

    Turkish lira

    The Turkish lira plunged by as much as 5% against the dollar this morning.

    This week, Turkey has been directing its banks to withhold lira liquidity from the London market, in order to defend the currency until after local elections on Sunday 31 March.

    The Turkish government had apparently also ordered its banks to keep foreign investors from exiting lira trades, according to reports.

    That's why the London overnight swap rate rocketed to 1,200% on Wednesday - the highest rate on record - but that is now back towards 50% amid signs that Turkish banks have started provided lira to the market again.

  4. Turkey 'making it impossible' to sell the lira

    Turkish lira

    The Turkish government has come up with an innovative way to prevent its currency from falling - make it impossible for foreign investors to sell the lira.

    Four bankers have told Bloomberg on condition of anonymity that Turkish banks are under pressure not to provide liquidity ahead of local elections on 31 March, meaning that many foreign hedge funds are trapped in lira trades.

    In the weeks leading up to and after President Recep Erdogan's election win in June 2018, the lira sunk to record lows.

    By August the currency had lost over 34% of its value against the dollar, due to fears Turkish firms would struggle to repay loans, as well as an increase in US tariffs on Turkish steel and aluminium.

  5. Turkish growth worst since attempted coup

    The Celsius Library in the Aegean region

    Turkish economic growth dwindled to 1.6% year-on-year in the third quarter of 2018, falling short of estimates of 2%, due to its currency crisis and soaring inflation

    This is the worst performing quarter since the third quarter of 2016, following the attempted military coup against President Tayyip Erdogan.

    A sell-off of the lira since January has driven up the costs of food and fuel, forcing Turkey's central bank to raise interest rates to 24%.

  6. Erdoğan takes aim at 'independent' central bank

    Turkish President Recep Tayyip Erdoğan

    Turkish President Recep Tayyip Erdoğan is not pleased with the country's central bank after it defied him on Thursday to raise the interest rate to 24%.

    President Erdoğan said: "Yesterday the central bank issued the constantly-debated interest hike, and at a very high rate. They talk about the independence.

    "There you go, independence. We will see the outcome of the independence."

    He added: "I am personally patient right now but this patience also has limits."

  7. Turkey's central bank asserts independence

    Turkey's central bank governor Murat Çetinkaya
    Image caption: Turkey's central bank governor Murat Çetinkaya

    Commenting on the decision by Turkey's central bank to raise the interest rate, Neil Wilson, chief market analyst at Markets.com, says: "This was a hike beyond what the market was thinking and in the context of the earlier comments from president Erdogan, is being treated warmly by markets.

    "It represents a major and important reassertion of the central bank’s independence and shows they will not be bullied by politicians, although to a large degree its hand was forced by the 18% print on August inflation."

    He says: "There was also a commitment to do more if necessary and that will be regarded as a sign that policymakers are serious, although it’s maybe a tad short of being a ‘whatever it takes’ type commitment – indeed the move on the lira only takes it back to where it was at the end of August."

  8. Turkey's bank defies Erdoğan to raise rates

    President Recep Tayyip Erdoğan

    Turkey's central bank has defied calls from President Recep Tayyip Erdoğan and voted to raise interest rates to 24% from 17.75%.

    Earlier today President Erdoğan said the central bank should cut the rate, saying that high interest rates cause inflation.

    However, the bank lifted the one week repo rate above forecast between 21% and 22%.

    The lira jumped against the dollar after heading lower earlier on President Erdoğan's calls for a cut.

  9. Erdogan calls for interest rate cut

    President Tayyip Erdogan

    As well as the Bank of England and the European Central Bank, Turkey's central bank is also meeting today to discuss the interest rate.

    But unlike its UK and European counterparts, Turkey's independent central bank is dealing with a president who says the rate should be cut.

    Speaking on Thursday, President Tayyip Erdogan has just said that "tough times call for tough measures" and said: "We should cut this high interest rate."

    The bank had been expected to lift interest rates.

    But President Erdogan described high interest rates as a "tool of exploitation".

    Turkey has been mired in a currency crisis during the summer sending the value of the lira down to record lows against the dollar.

  10. Turkey's calm before the storm

    Turkish lira

    The Turkish economy grew 5.2% in the second quarter between April and June in what is expected to be the last quarter of solid growth for some time.

    Turkey has been mired in a currency crisis during the summer which has seen the value of the lira hit record lows against the dollar.

    The reading for second quarter growth was slightly below analysts' expectations of 5.3% expansion.

    Read about Turkey's currency crisis here.

  11. Is Turkey imploding?

    Video content

    Video caption: The collapse of the Turkish lira has exposed deeper problems. How bad is the situation?

    The currency crisis in Turkey has exposed deep-seated economic difficulties and raised questions about President Erdogan's style of leadership. Just how serious is the situation?

  12. Turkey and US trade threats in pastor row

    Donald Trump and Recep Tayyip Erdogan in Brussels, July 2018
    Image caption: The pastor is only one of a number of issues dividing Mr Trump and Mr Erdogan

    Turkey has warned it will retaliate if the US imposes further sanctions over a detained US pastor as the row between the two Nato allies intensifies.

    Andrew Brunson has been held in Turkey for nearly two years over alleged links to political groups. On Friday, a court rejected another appeal to free him.

    President Donald Trump said the US was not going "to take it sitting down".

    Turkey's currency, the lira, has plummeted after the two nations imposed tariffs on one another's goods.

    The impact of the new tariffs on imported goods has prompted widespread selling in other emerging markets, sparking fears of a global crisis.

  13. Turkish lira falls on the dollar

    Clothing shop in Turkey

    The Turkish lira is currently 6.1 against the US dollar, down from 5.8 at the beginning of trading.

    David Cheetham, chief market analyst at XTB, says: "After hitting its lowest ever level against the US dollar late on Sunday night, this week has seen a fairly good recovery in the Turkish Lira, with the currency rallying around 20% from its lows to yesterday high.

    "Having said that, this has only seen price recover back to where it was last Friday morning before it crashed lower and plenty of downside risks remain.

    "In the last couple of hours the Lira has come back under pressure, falling more than 7%, with a warning from the US that they may impose further sanctions nipping the recovery in the bud."

    He says: "The measures implemented by the Turkish authorities thus far have been lacklustre and not really dealt with the underlying issue of runaway inflation in a satisfactory manner and it would be no surprise at all if there’s more pain ahead for Turkish assets."