Quotes: US MENA   Enter Symbol: NewsLetter: Search: advanced

Turkish central bank struggles to prop up lira  Join our daily free Newsletter

MENAFN - AFP - 25/08/2013
No. of Ratings : 0
Add to Mixx!



(MENAFN - AFP) Turkey faces another week under pressure in its fight to shore up the lira as well as growth.

The country is in the front line of emerging economies hit by an outflow of investment because the US Federal Reserve central bank is signalling that it will soon curtail the injection of stimulus funds which have supported the US economy, and growth abroad, and have helped to keep interest rates low.

The Turkish central bank ended last week on the back foot after a rate rise, and intervention on the foreign exchange market, failed again to halt a fall of the lira and share prices, and a rise of the 10-year borrowing rate.

Meanwhile, the government took the line that the US Federal Reserve was fuelling uncertainty, that Turkey would emerge stronger from the turmoil and that the lira would eventually recover.

The events of last week demonstrated changes of direction by the central bank and a dilemma over growth for the government.

At the central bank, declarations of determination to tighten monetary policy as needed have hardened since it announced emergency measures at the beginning of July.

The government has also modified its tone, since three months ago Prime Minister Recep Tayyip Erdogan attacked those who argued for higher rates against a background of serious civil unrest seen as his greatest challenge since coming to power in 2002.

Before the central bank, statutorily independent, announced its emergency measures including the use of foreign reserves to buy lira, Erdogan had said repeatedly that the bank would do everything necessary to hold rates down, hoping to sustain growth.

But even then analysts were warning that high growth rates which have propelled the Turkish economy and its ambitions in the region, were unduly dependent on credit and had generated a worrying deficit on the balance of payments on current account.

The economy was already "fragile" because of excessive credit and the payments deficit financed mostly with short-term foreign funds, journalist Ege Cansen wrote in the Hurriyet daily on Saturday, arguing that the expected change in US policy had highlighted chronic problems.

Strains had been evident in 2011 when the payments deficit reached 10 percent of national income and policy-makers had "failed to implement the soft-landing project" to reduce the budget deficit, limiting credit expansion and allow the lira to fall, he said.

Emerging Turkey, with a population of 76 million and the world's 17th-biggest economy, has achieved strong economic growth in the last decade after severe financial crises and IMF rescues, and is now an economic powerhouse in its region.

Erdogan's Islamic-rooted Justice and Development Party (AKP), which came to power after the crises and won three elections in a row, has built its big regional ambitions on high growth. But now the government is expecting growth of just 4.0 percent this year, half the rate of two years ago.

Despite the turmoil, the government was reassuring. AKP spokesman Huseyin Celik said on Thursday that in a global world, everyone was exposed to events abroad. "When some sneeze at the New York Stock Exchange, some others at the Istanbul Stock Exchange could catch a cold." There was no room for pessimism, he said, and the government would take "measures".

Last week, the central bank decided to raise its overnight rate by 0.50 percentage points to 7.75 percent, having raised it by 0.75 points at the end of July.

But it left its benchmark repurchase rate at 4.5 percent, and the rate increase coupled with intervention on the foreign exchange market had little effect on the lira, which has slid by some 12 percent since February and was trading at 1.9914 to the dollar at Friday's close.

Financial analysts said that the measures taken by the central bank were too complex, and they suggest that the bank may call an urgent policy meeting in the next few days.

At HSBC Asset Management Turkey, senior investment strategist Ali Cakiroglu said that monetary policy could not compensate fully for the vulnerability of Turkish assets, adding that it seemed "highly likely" that the central bank would hold an unscheduled policy meeting

He suggested that a sizeable rate increase, coupled with clear messages on the outlook of the monetary policy, might help to stabilise the lira.

But he warned: "All in all, it seems that Turkish assets might remain under selling pressure, unless the depreciation of the Turkish lira stops in the coming days."


 


AFP




  MENA News Headlines
 Sep 18 2014 - Qatar- HE Premier Sends Congratulations to President of ChileQatar News Agency
(MENAFN - QNA) HE the Prime Minister and Interior Minister Sheikh Abdullah bin Nasser bin Khalifa Al-Thani sent Thursday a cable of congratulations to President of the Republic of Chile Michelle ...

 Sep 18 2014 - US House Passes Obama's Syria Military PlanQatar News Agency
(MENAFN - QNA) The US House of Representatives has approved President Barack Obama's plan to train and equip moderate Syrian rebels to counter the growing threat of the Islamic State organization ...

 Sep 18 2014 - US won't fight another Iraq ground war: ObamaArab News
(MENAFN - Arab News) MACDILL AIR FORCE BASE: Florida: President Barack Obama vowed on Wednesday the United States will not fight another ground war in Iraq seeking to reassure Americans about the ...

 Sep 18 2014 - US strikes boost IS more hostages possible: FBIArab News
(MENAFN - Arab News) WASHINGTON: Support for Islamic State increased after US airstrikes began in Iraq and the militant group may take more hostages to try to force concessions from Washington the ...

 Sep 18 2014 - Apparel Group to open 50 new stores in KSAArab News
(MENAFN - Arab News) Dubai-based Apparel Group most recognized for its portfolio of international fashion and accessories brands brings yet another fashion chain to the Middle East.R&B the ...

 Sep 18 2014 - Zain KSA launches iPhone pre-ordering FridayArab News
(MENAFN - Arab News) Zain KSA announced that it will launch the pre-ordering for the new Apple devices iPhone 6 and iPhone 6 plus on Friday enabling customers to pre-order their device from Zain ...

 Sep 18 2014 - Dubai, Azerbaijan discuss way to strengthen tiesMENAFN
(MENAFN) The Dubai Chamber of Commerce and Industry announced it had a meeting with several Azerbaijani banks as part of their efforts to enhance UAE"Azerbaijan bilateral banking ties, Khaleej Times ...

 Sep 18 2014 - Bahrain, Kazakhstan to boost trade tiesMENAFN
(MENAFN) Bahrain said it is looking forward to boost ties with Kazakhstan following the Bahraini King's recent visit, which resulted in many agreements and memoranda of understanding being signed in ...

 Sep 18 2014 - Batelco, Milestone sign key dealMENAFN
(MENAFN Bahraini Batelco announced it has signed signed a deal with Milestone, a provider of open platform Internet Protocol video management software, Gulf Daily News reported.Batelco, which has ...

 Sep 18 2014 - Mashreq eyes acquisitions in Egypt, TurkeyMENAFN
(MENAFN) Dubai's Mashreq announced it is planning to target acquisitions in Egypt and Turkey as it tries to expand beyond its home market, Gulf Daily News reported.Mashreq, Dubai's third-largest bank ...

more...


 






Google

 
 

Middle East North Africa - Financial Network

MENAFN News Market Data Countries Tools Section  
 

Middle East North Africa - Financial Network
Arabic MENAFN

Main News
News By Industry
News By Country

IPO News
Islamic Finance News
Private Equity News

How-To Guides
Technology Section

Travel Section

Search News

Market Indices
Quotes & Charts

Global Indices
Arab Indices

US Markets Details

Commodoties

Oil & Energy

Currencies Cross Rates
Currencies Updates
Currency Converter

USA Stocks
Arab Stocks
 

Algeria 
Bahrain 
Egypt 
Iraq
Jordan 
Kuwait 
Lebanon
Morocco 
Oman 
Palestine
Qatar 
Saudi Arabia 
Syria
Tunisia 
UAE 
Yemen

Weather
Investment Game
Economic Calendar
Financial Glossary

My MENAFN
Portfolio Tracker

Voting

Financial Calculators

RSS Feeds [XML]

Corporate Monitor

Events

Real Estate
Submit Your Property

Arab Research
Buy a Research

Press Releases
Submit your PR

Join Newsletters


 
© 2000 menafn.com All Rights Reserved.  Terms of Service | Privacy Policy | Contact Us | Advertise | About MENAFN | Career Opportunities | Feedback | Help