Title: Turkey's lira nears record low ahead of cenbank meetings
Dec 15, 2021 08:41AM ET
The lira weakened 2.4% against the dollar on Wednesday on expectations of another interest rate cut in Turkey the next day and a key decision by the US Federal Reserve that could pull more funds out of emerging markets.
The lira fell as low as 14.75 against the US currency, approaching the record low of 14.99 it hit on Monday. By 1312 GMT, it was at 14.70, more than 49% weaker than at the end of last year.
Investors fear the US Federal Reserve may take a tighter stance than previously expected at its meeting on Wednesday, unveiling plans to tighten policy and raise interest rates next year.
Turkey's central bank is expected to cut its key interest rate by 100 basis points on Thursday, despite the slump in the lira and rising inflation, as President Tayyip Erdogan applies pressure to boost growth ahead of elections in 2023.
The bank has cut its key interest rate by 400 basis points to 15% since September as Erdogan seeks to prioritize exports and lending, even as economists call the move reckless.
The bank has intervened in the foreign exchange market four times in the past two weeks, selling dollars to curb the sell-off. It will announce its interest rate decision at 1100 GMT on Thursday.
The lira's slide is exacerbating inflation, which hit a three-year high of 21.3% last month. It is also eroding Turks' incomes and fuelling discontent among workers.
Health unions representing more than 250,000 health workers went on a one-day strike on Wednesday to protest what they see as poor wages and harsh working conditions.