Significant decrease
With a decline of 1.4% against the dollar, to around 8.5434 Tuesday, and a break of the 10-pound barrier against the euro for the first time, the size of the decline in the currency’s value this year reached about 30%.
The lira’s decline has accelerated since the Turkish Central Bank last month defied expectations by maintaining the main repurchase rate for one week, while continuing to enact measures to raise the cost of borrowing, at a time when markets expected it to intervene by raising interest rates, in an attempt to enhance its value against Foreign currency basket.
The impact of the US elections
The lira has been declining continuously since the beginning of the year, due to the possibility of Joe Biden winning the US elections, which worries traders who are already worried about the widening current account deficit in Turkey, dwindling foreign exchange reserves, geopolitical tensions, and the increase in coronavirus infections.
Biden will likely take a tougher stance against the Turkish government than President Donald Trump, over the country’s purchase of the Russian S-400 missile defense system.
Trade deficit
On Friday, data from the Turkish Statistical Institute showed that the country’s foreign trade deficit rose by 189.6% year-on-year in September, to $ 4.828 billion according to the general trade system, at a time when tourism revenues fell by 71.2%.
The institute said in its report that Turkish exports increased by 4.8%, while imports jumped 23% compared to September 2019. In the first nine months of the year, the trade deficit jumped 79.5% to 37.86 billion dollars.
Rescue attempts
In an attempt to save the lira, the Turkish central bank raised the main interest rate by 200 basis points to 10.25%, last September, and it was the first increase in two years, after it reached a series of record low levels, against hard currencies over a month, according to Reuters. “.
Despite this measure, the US bank, Goldman Sachs, suggested that Turkey would suffer less than expected economic contraction, a wider current account deficit this year, and a further rise in interest rates.
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