Turkish lira tests new historic lows as rift with EU widens

By bne IntelliNews November 16, 2016

The Turkish lira hit a new historical low of 3.3203 against the dollar on November 16 as Ankara's rift with Brussels is growing amid calls for end of accession talks. 

The lira has been on the free fall in recent months as internal woes are adding to turbulence on emerging markets. The currency came under renewed pressure as relations between Turkey and the European Union are growing increasingly tense. The European Parliament is expected to vote next week on a resolution calling for the suspension of membership talks with Turkey in response to President Recep Tayyip Erdogan’s crackdown on dissent after July’s failed coup attempt.

Though non-binding, the resolution could further intensify tensions with Ankara, which is becoming increasingly frustrated with the fact that, after 11 years of negotiations, its prospects of joining the EU look more remote than ever. Erdogan even suggested this week that Turkey could hold a referendum on whether to continue membership talks.

The recent turbulence on emerging markets after Donald Trump’s unexpected victory, the FED’s expected rate hike next month, geopolitical risks related to the ongoing conflicts in Syria and Iraq along with domestic woes have been weighing on the Turkish lira in recent months.

The government in Ankara, however, is shrugging off weak lira concerns. Deputy Prime Minister Numan Kurtulmus said on November 14 that the US dollar was strengthening against the lira not because of the problems in the fundamentals of the Turkish economy, but it is rallying against other currencies as well. The weakening of the lira is only temporary, and should not cause concerns, Kurtulmus also said.

The lira gained some ground later on November 16, rising 0.895 to trade at 3.3174 against the dollar at 14:44 Istanbul time. The benchmark BIST-100 index was down 0.29%.

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