Turkish Lira Hits Record Low Despite Aggressive Rate Hikes
The Turkish lira remains stagnant at an all-time low, sitting at 28.9 against the US dollar. This comes even after Turkey's central bank made an unexpected move, raising interest rates significantly by 500 basis points in its latest November meeting. This decision surpassed investors' expectations, who had predicted a rise of only 250 basis points.
Trend of Depreciation
In the last three months, the Turkish lira has been on a steady decline, setting new daily lows. The average daily loss has been slightly over 0.1%. This pattern suggests a controlled devaluation, likely orchestrated by the central bank. To manage this situation, the bank has implemented stricter reserve requirements for the lira. This step is aimed at pulling liquidity from the interbank market, thereby increasing local interest rates and aligning them more closely with the costs of borrowing lira internationally.
A Steep Drop in Value
Since the beginning of 2023, the Turkish lira has seen a dramatic depreciation, losing over 50% of its value when compared to the US dollar. This significant drop highlights the ongoing economic challenges faced by Turkey.