(Bloomberg) -- The Turkish lira fell to a record low after the central bank cut borrowing costs for a third straight month, a move that risks further undermining price and currency stability.
The lira fell as much as 3.3% to 10.9765 against the dollar, extending the biggest depreciation in emerging markets this year. Policy makers cut the one-week repo rate by 100 basis points to 15%, in line with the median estimate in a Bloomberg survey.
Consumer inflation accelerated to almost 20% in October, a level last seen in the wake of a currency crisis three years ago. Yet under pressure from President Recep Tayyip Erdogan, the central bank has lowered interest rates by 400 basis points since September, driving the currency’s real yield well below zero.
Easier policy in Turkey also leaves the lira vulnerable to further gains in the U.S. dollar. The greenback rose to the highest level in more than a year against a basket of peers this week, piling pressure on riskier emerging-market currencies.
The lira has lost around a third of its value against the dollar since December and is poised for a ninth straight yearly loss. It has weakened more than 20% since the central bank started cutting rates in September.
Turkey’s benchmark BIST 100 Index erased earlier gains to trade 0.5% higher after the decision. The yield on 10-year government bonds jumped as much a 57 basis points to 20.44%.
The lira pared declines to trade at 10.8391 per dollar as of 2:18 p.m. in Istanbul.
©2021 Bloomberg L.P.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.