Turkish Lira Tumbles as Investors Panic Before Erdogan Address

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Title : Turkish Lira Tumbles as Investors Panic Before Erdogan Address
Link : Turkish Lira Tumbles as Investors Panic Before Erdogan Address

(Bloomberg) -- Turkey edged closer yet to a full-blown financial meltdown.

Ahead of a much-anticipated public address by President Recep Tayyip Erdogan, the lira plunged more than 11 percent to a fresh record, headed for its worst week since 2001. Speaking outside a mosque earlier today, Erdogan told followers “Don’t forget this: if they have got dollars, we have got our people, our right, our Allah,” according to state media.

Government bonds slumped, sending benchmark yields to an all-time high amid falling investor confidence in the authorities’ ability to stem the market rout.

As Erdogan speaks later in the day, investors will be looking for any sign that he is willing to ease tensions with the U.S. sparked by the detention of an American pastor. The worry is that Turkey will face further sanctions if he is not released. The market will also watch whether the president will play down his long-held distaste for higher borrowing costs that many investors say is standing in the way of policy efforts to anchor the nation’s assets.

“Seems like a complete crash, so they need to act now,” said Morten Lund, a strategist at Nordea Bank AB in Copenhagen. “The lira will keep falling if they don’t hike rates today.”

Lira’s Drop Seen Extending as Contagion Risk Grows, Analysts Say

The turmoil threatens to scare away the foreign capital that Turkey depends on to finance its large external deficit, and hampers companies’ ability to repay foreign-currency loans. The government cut its 2018 growth target Thursday to less than 4 percent, from 5.5 percent, a sign that it is willing to accept a more moderate pace of expansion in an effort to rebalance the economy. READ MORE