Turkish lira weakens as inflation soars to highest in Erdogan era

[Zibago]

Turkish lira weakens as inflation soars to highest in Erdogan era
Reuters 04 Jan 2022

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ISTANBUL: Turkey's lira weakened 1.4% on Tuesday as investors weighed the consequences of a surge in the country's inflation rate to its highest in 19 years following the implementation of an unorthodox rate-cutting policy.
The lira stood at 13.15 to the dollar, as of 0500 GMT, weakening from a close of 12.96 on Monday. The lira hit a record low 18.4 two weeks ago before rebounding following the government's steps to support the unit.
Last year, the lira weakened 44%, making it by far the worst performer in emerging markets and marking its worst year since President Tayyip Erdogan came to power nearly two decades ago.
Data on Monday showed consumer prices surged 36.08% year-on-year in December, higher than a poll forecast of 30.6%, driven by an increase in annual transportation prices, food and drinks.
Volatile Turkish lira seesaws after inflation surges
Speaking after a cabinet meeting on Monday, Erdogan said he was saddened by the inflation data and that his government was determined to lower it to single digits, blaming the climb on global commodity prices and a weaker lira.
Since September the central bank has cut its policy rate by 500 basis points to 14% as Erdogan pushes a "new economic programme" focused on credit and exports.
To curb the lira weakness, Erdogan unveiled a scheme two weeks ago in which the state protects converted local deposits from losses versus hard currencies. He said on Monday that 78 billion lira ($6 billion) had been deposited in such accounts.

Turkish lira weakens as inflation soars to highest in Erdogan era

ISTANBUL: Turkey's lira weakened 1.4% on Tuesday as investors weighed the consequences of a surge in the country's...

www.brecorder.com

 

[Pakistan Space Agency]

One of worst currencies on this planet. Millions of Liras equivalent to $1.

 

[QWECXZ]

One of worst currencies on this planet. Millions of Liras equivalent to $1.

That was many years ago. They slashed 6 zeroes in 2005. Now 1 USD is about 13 TL.

 

[retaxis]

Turkish economy is in a bad place. The GDP per capita has been going down year after year which is not good at all.

 

[Pakistan Space Agency]

That was many years ago. They slashed 6 zeroes in 2005. Now 1 USD is about 13 TL.

Just by slashing the zeros on notes does not mean the currency has magically appreciated. Removing zeros is only for visual purposes.

 

[Titanium100]

It must be a slow news day from a news website that i have never seen probably a tabloid.. Turkish lira has stabilized tho and this Article is reporting ground realities which is on the contrary...

You can always find these tabloids circulating news that are months old because they don't have a budget..

I even see sometimes some tabloids who are reporting articles from Trump era and just recycling them

 

[Foinikas]

It must be a slow news day from a news website that i have never seen probably a tabloid.. Turkish lira has stabilized and this Article is reporting ground realities

It was on the news here too yesterday. Inflation in Turkey reached 36,08%

 

[dBSPL]

Inflation is on the agenda of the whole world. Some of the latest news I read for example: Even in Germany, electricity and natural gas have doubled. Likewise in England. The situation in the Balkan countries is much more difficult.

Half of the US public believes inflation figures have been manipulated, and even Biden had to say something about it recently. The inflation problem in Russia cannot be overcome, there is an inflation rate of almost 40% in Turkey, and even in Iran, which is a net energy exporter, inflation is around 40%. So it is necessary to consider this issue in a broader perspective. What I want to say is that the changing economic balances in the world are pushing the residents in many corners of the world, especially people with low incomes.

Only in this forum, the number of titles opened using the news in the international press about the Turkish economy is around 50. I think the other issue that needs to be discussed is why Turkey is the focal point? Inflation in Turkey has become world news. Why? Is Turkey that important? Simply, No. But every week, the message is given by an official from an international financial institution, or more often by newspaper headlines, that Turkey did not go the way we suggested and it will pay the price. This effort to disciplinizing is clearly meaning.

 

[Titanium100]

It was on the news here too yesterday. Inflation in Turkey reached 36,08%

I am talking about the lira it has stabilized.. Uds 1 for 13 tl.. Inflation is everywhere due to covid not specfic to one place

 

[Zibago]

Darnomics to the extreme

Turkey has to increase interest rates

 

[QWECXZ]

Just by slashing the zeros on notes does not mean the currency has magically appreciated. Removing zeros is only for visual purposes.

Yes, but just because a currency has so many zeroes that doesn't make it bad either. Take the Korean won or the Japanese Yen as examples. It has nothing to do with zeroes, but I agree that Turkish Lira hasn't performed well historically.

 

[Beny Karachun]

Yes, but just because a currency has so many zeroes that doesn't make it bad either. Take the Korean won or the Japanese Yen as examples. It has nothing to do with zeroes, but I agree that Turkish Lira hasn't performed well historically.

But if Japanese yen would get stronger against the US dollars, Japanese citizens could easily buy more American products and services with their Yen. So if Japan slashed a zero against the US dollar, their buying power in the US multiplied 10 times.

Same thing about Turkey, but the opposite. The weaker it gets against the US dollar, the less products and services they could buy.
Turkish buying power today is one half of what it was one year ago, in the international market.

 

[Turingsage]

Just by slashing the zeros on notes does not mean the currency has magically appreciated. Removing zeros is only for visual purposes.

It also means you do not need a wheelbarrow of notes to buy a loaf of bread.

I am talking about the lira it has stabilized.. Uds 1 for 13 tl.. Inflation is everywhere due to covid not specfic to one place

At 36% ?????

 

[dBSPL]

The central bank does not foresee an increase in interest rates for the next 6 months.

TL swaps of foreigners decreased by nearly 90%. The amount of TL swaps made by foreigners with Turkish banks decreased by 2 billion dollars more, to 2.5 billion dollars as of December 21. In the week of March 19, the swap position of foreigners was at the level of 24 billion dollars.

For domestic deposits, a value protected system was introduced. TL deposit accounts are not affecting by the exchange rate loss anymore. In a statement made the recently, the CB announced that the fx protected deposit system is one of the 17 instruments determined and the others will be put into operation respectively.

With the decree, 25% of export revenues have to be converted into TL. Likewise, exporters began to be supported by government subsidies to prevent them from being affected by exchange rate fluctuations.

As Turkiye slows volatility on currency, markets will normalize. However, you cannot isolate this normalization from the inflationary pressure that is currently being experienced around the world. Turkiye has to take its share like everyone else.

 

[QWECXZ]

But if Japanese yen would get stronger against the US dollars, Japanese citizens could easily buy more American products and services with their Yen. So if Japan slashed a zero against the US dollar, their buying power in the US multiplied 10 times.

Same thing about Turkey, but the opposite. The weaker it gets against the US dollar, the less products and services they could buy.
Turkish buying power today is one half of what it was one year ago, in the international market.

I'm not sure if you're trolling or not, but if you are not, this is by far one of the least rational things I have read in a while.

If Japan slashes one zero, their purchase power of the Japanese citizens will stay the same because salaries and pensions will be paid in the new currency, not by the old numbers.

The reason that countries do not slash off zeroes so easily and frequently is because it's costly and it can indirectly contribute to inflation for 2 main reasons:
1- denominations: old sub-units will be rounded up and will appear less significant, causing a slight increase in inflation due to rounding up and its psychological effects.
2- liquidity: the printed money in circulation will temporarily increase if the decision is hastily executed, which can be inflationary. The country should slowly replace old banknotes with new ones and it can take years.