Turkish lira hits record low after jumbo rate cut

The Turkish lira edged higher on Thursday after briefly hitting a record low as the country’s central bank cut rates more than expected, while a dip in the dollar offered some respite to other emerging market currencies.

The lira TRYTOM=D3 stood at 18.58 against the dollar, up from Wednesday’s close of 18.6 and a record low of 18.6150 it touched briefly after the rate announcement.

Turkey‘s central bank delivered a bigger-than-expected 150 basis-point cut to 10.5%, and promised to halt the easing cycle urged by President Tayyip Erdogan after another similarly-hefty cut next month.

“The interest rate cut doesn’t make sense at the current levels because inflation is way too high,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

“It’s like a time bomb. As long as money pours in, the central bank will be able to spend all this money in order to keep the dollar pretty much stable,” Ozkardeskaya said. “But if the money just stops coming in, then Turkey won’t be able to keep the lira at the current levels against U.S. dollar.”

(Reuters)