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ANKARA, May 25 (Reuters) – The Turkish lira slipped to nearly 16.2 against the dollar on Wednesday, touching its weakest level since December, as bankers questioned the authorities’ ability to stabilize the currency without news sources of foreign currency.
The lira has weakened 8% this month and almost 19% this year, despite costly interventions in which the central bank sold dollars to soften the blow. The currency dipped as low as 16.1990 and settled at 16.185 at 0654 GMT.
On December 20, the emerging market currency hit a record low of 18.4 against the dollar after a series of interest rate cuts sent it down 44% for the year as a whole. In response, inflation has since jumped to 70% in April.
The pound remained virtually stable at the start of the year, due to a government program that protects lira deposits against depreciation and the central bank meeting the market’s foreign exchange needs from its reserves.
But these efforts to keep the currency stable have weighed on the reserves of the Central Bank of the Republic of Turkey (CBRT), according to bankers.
“We estimate that CBRT currency sales exceeded $30 billion between January and April,” said economist Haluk Burumcekci, adding that daily balance sheet analytical data showed sales were more intense in May.
“We calculate that adjusted for bank swaps, the size of net international reserves at the end of the first 20 days of May declined further by $7.7 billion,” he said.
Data from last Friday showed that the central bank’s net international reserves fell by some $3.5 billion to $11.53 billion in the week to May 13. Bankers calculate they fell to $10 billion or less the following week. Read more
The war in Ukraine began to put pressure on the lira in March, with Western sanctions on Russia sending energy prices skyrocketing, pushing up Turkey’s already hefty import bill and fueling inflation. .
On Tuesday, the cost of insuring Turkish debt against default rose to its highest level since the 2008 global financial crisis. IHS Markit data showed that credit default swaps (CDS) at 5 years had gone from 704 points to 730 basis points.
Reporting by Nevzat Devranoglu Writing by Daren Butler Editing by Jonathan Spicer
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