Turkish lira firms ahead of economic plan announcement

Turkish lira

Turkish lira has lost some 40% this year.

Reuters/IstanbulThe Turkish lira strengthened 1% on Wednesday as investors weighed up expectations for Thursday’s announcement by Finance Minister Berat Albayrak of the government’s medium-term economic programme.

Albayrak has promised “realistic macro targets” and “right action plans” in the three-year programme to 2021. He has also promised savings measures and said the fight against inflation and the current account deficit are priorities. The government needs to announce concrete details on what steps it will take to address Turkey’s economic troubles, said Guillaume Tresca, senior emerging markets strategist at Credit Agricole.

“Finance Minister Albayrak describes the right issues and the right programmes,” he said, commenting on previous statements by the minister.  “But it was just words, so now we need to see the implementation of something new, something real.”

The medium-term programme generally focuses on government macroeconomic targets, notably for growth, inflation, unemployment, the budget and current account. The lira stood at 6.3100 at 0955 GMT on Wednesday, firming from the previous day’s close of 6.3800. The currency has lost some 40% this year on concerns over President Tayyip Erdogan’s grip on monetary policy and the independence of the central bank. A diplomatic row between Ankara and Washington over the trial of a US evangelical pastor in Turkey has added to selling pressure on the lira.

The central bank hiked interest rates by 6.25 percentage points last week in a bid to tame double-digit inflation and put a floor under the lira. The currency initially strengthened, only to weaken as far as 6.4620 against the US dollar on Wednesday, returning to pre-hike levels. The yield on the benchmark 10-year bond fell to 18.57% on Wednesday from 19.02% on Tuesday.

Sources and photo-credits: Gulf Times