This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: Turkish Lira, Stocks Sink Amid Inflation Concerns
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > Turkish Lira, Stocks Sink Amid Inflation Concerns
Markets

Turkish Lira, Stocks Sink Amid Inflation Concerns

Editorial Board Published December 17, 2021
Share
Turkish Lira, Stocks Sink Amid Inflation Concerns
SHARE

Istanbul’s stock market was twice forced to halt trading and the Turkish lira continued to fall Friday as concerns deepened that recent interest-rate cuts could cause an inflationary spiral.

Contents
Newsletter Sign-upMarkets

Turkey’s benchmark Borsa Istanbul 100 index sank 8.5% Friday in its worst day since March, triggering two circuit breakers that halted trades. The lira lost as much as 8% of its value against the dollar, despite Turkey’s central bank intervening to arrest the decline in the country’s currency.

The crash followed another decision by the central bank on Thursday to cut interest rates under pressure from President Recep Tayyip Erdogan, who favors lower rates as a part of a vision to grow the Turkish economy. Mainstream economists have urged the government to raise interest rates to control Turkey’s rising inflation, which reached more than 21% last month, according to official statistics.

The lira’s continuing decline is increasingly squeezing ordinary Turks, who have seen their savings evaporate. It is also adding to pressure on the banking system, which has high levels of foreign-currency-denominated loans to repay within the next 12 months. As of September, the loans equaled about 11% of Turkey’s gross domestic product, according to Capital Economics.

“We are astonished to watch the central bank releasing its precious foreign exchange resources to the market today after it cut rates yesterday,” said Erdal Bahcivan, chairman of the board of the Istanbul Chamber of Industry, in a tweet.

Friday’s decision to intervene in the currency market was the fifth time that the central bank has stepped in to prop up the lira this month. It cited “unhealthy price formations in exchange rates,” in a statement declaring the intervention.

Economists estimate that Turkey’s central bank has more foreign-currency liabilities than assets, giving it little firepower to steady the lira through intervention. Despite the central bank selling assets Friday after the lira fell past 17 to the dollar, the currency began to slide again hours later.

“The diminishing impact of intervention is really telling,” said Paul McNamara, an emerging-market fund manager at GAM. “With this kind of intervention, the trouble is the market knows the level of reserves they have. It’s not like Russia or Brazil—countries that really have a lot of foreign currency they can throw at this.”

The lira has lost more than half its purchasing power against the dollar this year, much of that decline in the past month, a dramatic unraveling reminiscent of past emerging-market crises in places such as Argentina and Lebanon.

The plummeting lira makes it more likely that Turkey will need to implement capital controls—measures to restrict or even prohibit the flow of money out of the country—to keep the lira from being heavily sold, Mr. McNamara said.


Newsletter Sign-up

Markets

A pre-markets primer packed with news, trends and ideas. Plus, up-to-the-minute market data.


Turkey’s ability to impose such controls is complicated by the country’s consistent need for foreign currencies as banks and companies need to repay or service debts. Investors see few other options for Turkey to stabilize the lira, expecting that Mr. Erdogan won’t want to raise interest rates. The Turkish president has fired a series of central bank governors and other senior officials who opposed his unorthodox view of the economy.

The loss of confidence in Turkey’s monetary policy has also put pressure on other parts of the market.

Turkish stocks had seen a strong run before Friday. Locals might have preferred to put their savings into stocks rather than other assets as inflation has risen, investors said, because companies can increase prices alongside inflation, boosting returns.

“Generally, a little bit of inflation is good for equities,” said Daniel Wood, a portfolio manager at William Blair Investment Management. “Once you get concerned about hyperinflation, that’s bad for companies.”

Shortly after Thursday’s rate raise, Mr. Erdogan also announced an increase in Turkey’s minimum wage, which could also stoke inflation, Mr. Wood said. Concerns over unbridled inflation might have prompted some investors to sell shares.

The cost of insuring against default on $10,000 of five-year Turkish dollar-denominated bonds using derivatives contracts called credit default swaps climbed to about $525 a year Friday, from about $380 a year at the end of June, according to FactSet. Investors buy these swaps if they think the price for insuring against a default will rise further.

“The upheaval in the markets and the level that foreign currencies reached worries many of our companies and affects them negatively,” said Rifat Hisarciklioglu, president of the Union of Chambers and Commodity Exchanges of Turkey.

As the Federal Reserve and other central banks around the world deal with rising inflation amid the economic recovery from the pandemic, Turkey — where the rate is currently over 20% — offers a warning. Soaring inflation has led to economic turmoil after years of broad growth. Photo: Sedat Suna/Shutterstock

Write to Caitlin Ostroff at [email protected] and Jared Malsin at [email protected]

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article What’s Not to Like About a Fund With a 7% Yield What’s Not to Like About a Fund With a 7% Yield
Next Article FedEx Receives First Five of Its 500 Electric-Van Order From BrightDrop FedEx Receives First Five of Its 500 Electric-Van Order From BrightDrop

Editor's Pick

Alyssa Farah Griffin: ‘The View’ Co-Host is Pregnant With Child #1!

Alyssa Farah Griffin: ‘The View’ Co-Host is Pregnant With Child #1!

Studying Time: 3 minutes The View co-host Alyssa Farah Griffin is pregnant! On ‘The View,’ Alyssa Farah Griffin breaks the…

By Editorial Board 3 Min Read
Melissa Rycroft Admits to Actually “Struggling” in Wake of DUI Arrest
Melissa Rycroft Admits to Actually “Struggling” in Wake of DUI Arrest

Studying Time: 3 minutes Melissa Rycroft is in a darkish place proper…

4 Min Read
Amy Duggar Describes Studying Grandfather Was a ‘Predator’
Amy Duggar Describes Studying Grandfather Was a ‘Predator’

Studying Time: 4 minutes Amy Duggar King grew up figuring out and…

6 Min Read

Oponion

20 Luxurious Items for Cigar Lovers (Apart from Cigars) in 2024 | Fashion

20 Luxurious Items for Cigar Lovers (Apart from Cigars) in 2024 | Fashion

FYI After conducting thorough analysis, we’ve made a couple of…

October 8, 2024

Meghan Markle Planning to Expose Royals In New Memoir: Report

Meghan Markle’s debut memoir is reportedly…

October 1, 2024

Intel warns Trump’s fairness stake may harm enterprise operations

OLeary Ventures Chairman Kevin OLeary explains…

August 26, 2025

The Rise of the Robo-Voices

The Future of Everything covers the…

October 7, 2021

As Musk ramps up assaults on Trump’s “big, beautiful bill,” Johnson says he is “flat wrong”

Washington — GOP leaders in Congress…

June 5, 2025

You Might Also Like

Crypto massacre wipes out billions, however indicators of stabilization emerge
Markets

Crypto massacre wipes out billions, however indicators of stabilization emerge

Terry Duffy, CME Group chairman and CEO, weighs in because the cryptocurrency buying and selling platform Coinbase misplaced half its…

4 Min Read
Crypto dealer discovered useless in Lamborghini in Kyiv as market plunges
Markets

Crypto dealer discovered useless in Lamborghini in Kyiv as market plunges

Nexo co-founder and managing companion Antoni Trenchev discusses the cryptocurrency business on ‘Making Money with Charles Payne.’ This story discusses…

3 Min Read
Shares fall as US-China commerce struggle reignites after Trump threatens tariff hike
Markets

Shares fall as US-China commerce struggle reignites after Trump threatens tariff hike

Home Majority Chief Steve Scalise responds to Chuck Schumer’s shutdown feedback, JD Vance’s viral submit and the toll of the…

6 Min Read
Jamie Dimon warns of main market threat in subsequent few years
Markets

Jamie Dimon warns of main market threat in subsequent few years

CPA and market analyst Dan Geltrude joins ‘Mornings with Maria’ to interrupt down the record-setting rally fueled by synthetic intelligence,…

4 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?