Turkey’s lira has risen 6.5 percent in value against the dollar this year, reversing its steady 2020 slide and marking it as the best-performing currency among emerging markets so far in 2021.
The lira lost 20 percent of its value against the dollar last year, trading below 8 to the buck for the first time and falling below 7 late in 2020.
The gains follow Naci Agbal’s November installation as the governor of Turkey’s central bank. Agbal halted president Recip Erdogan’s mandated interest rate cuts, a move that stanched Turkey’s outflow of foreign cash reserves.
On 18 February, Agbal boosted the country’s benchmark interest rate by 6.75 points to 17 percent to combat inflation and ease Turks’ rush to convert their lira into dollars and other strong foreign currencies.
Turkey’s January inflation rate was 15 percent compared to 12 percent a year earlier and triple the bank’s target rate of 5 percent.
With interest rates two percentage points above inflation, investments denominated in lira can still eke out a profit.
Agbal’s “priority is to improve inflation and this has rebuilt the bank’s credibility, making the lira more attractive to foreign investors,” economist Enver Erkan at Turkey’s Tera Securities, commented to the Financial Times.
TREND FORECAST: In the race between economic growth and inflation, the economy is losing.
Moreover, as we have been reporting, there is growing social unrest in Turkey, especially among the younger generations.
With over 22 percent of its youth unemployed and Turkey being one of the worst-performing emerging markets in 2020, despite harsh crackdowns on dissent, with millions of young people facing bleak futures and with nothing to lose, they will take to the streets and organize new political movements to replace the establishment.
