Turkey lira hits highest level in 4 months

The Turkish lira hit its highest level in nearly four months yesterday, amid a fall in the US dollar and a decline in oil prices.

The lira rose as much as 1.5 per cent, with a dollar now equalling 5.21 lira, a level last witnessed on 9 August. On Friday the dollar lost 0.11 per cent of its value, and a decline that was credited with boosting the exchange rates of several emerging markets.

However, the rise was primarily motivated by falling oil prices as Brent crude experienced a 32 per cent drop from an October peak; as a major importer of oil, cheaper rates have eased the pressure on Turkish businesses.

Yet analysts warned that for the rise to be sustainable, Turkey needed to progress on making the structural economic changes promised by the Treasury and Finance minister, Berat Albyarak.

The lira has increased in value by almost 40 per cent since the summer, after reaching record lows following a diplomatic spat with the US over the detention of American pastor Andrew Brunson. US President Donald Trump placed trade sanctions on Turkish products, specifically steel and aluminium, which sent the lira plummeting and inflation rising.

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However, tensions have since eased as sanctions on two Turkish ministers were lifted following Brunson’s release last month.

In September the government also released a medium-term plan to tackle the country’s economic challenges, downgrading growth for the first time from 5.5 per cent to 3.8 per cent this year and 2.3 per cent in 2019.  The lira rallied briefly on the announcement with the plan met with praise from industry leaders.

Yet the government has still struggled to tackle inflation, which reached over 25 per cent last month following a sharp rise in September. In response, Albayrak urged the nation’s shops and businesses to give consumers discounts to keep prices in check, a move slammed by financial experts.

The lira dropped further weeks later after the treasury unveiled a round of tax cuts that sparked doubt over the government’s pledge to take a more disciplined fiscal approach.

Turkish President Recep Tayyip Erdogan named several of his advisers and a theology professor to a new economic policy committee this month in a bid to reassure foreign investors.

Despite, the recent rises, the lira has still lost 27 per cent of its value since the beginning of the year, with businesses still awaiting further action from the government to stabilise prices.

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