Turkey's bubble set to burst as lira plummets

Turkey's bubble set to burst as lira plummets
2 min read
06 January, 2017
The Turkish lira has plunged to a record low after a turbulent year for Turkey. Following the deadly nightclub attack on New Year's Day, it continues to fall.
Turkey's economy has been badly affected by security concerns in the country [Getty]
The Turkish lira has fallen to a new record low against the US dollar and the euro amid ongoing security crises and economic problems in the country.

On Thursday the Turkish lira fell to 3.64 against the dollar and 3.1 against the euro, according to a report from the Dogan News Agency.

Over the course of 2016 the Turkish lira fell 17 percent, the second-worst performance of any emerging market currency, behind the Argentine peso.

The Turkish lira has been badly hit by the proliferation of terror attacks in the country such as the Istanbul nightclub attack, which left 39 people dead on New Year's Eve, in addition to instability caused by July's failed coup and consequent security clampdowns that have seen thousands of Turkish nationals, across public and private sectors arrested and imprisoned.

But the currency's value has also been affected by growing inflation rates which rose from 7 percent in November 2016 to 8.5 percent in December, raising concerns of domestic inflation.

Analysts have expressed concern over further devaluations to the lira calling on Turkey's central bank to raise interest rates in order to avert speculators and give the currency a boost.

The bank is set to meet on January 24 having raised interest rates in November for the first time since 2014.

However, analysts have also warned that raising rates further could potentially be opposed by President Erdogan.

In recent years Erdogan has consistently asked the bank to lower rates despite the potential damage to the lira and previously called himself the "enemy" of interest rates, describing them as "means of exploitation".