Turkey

The Turkish lira has become so volatile that Turks have ditched the local currency for assets with an even riskier reputation: cryptocurrencies, the Wall Street Journal reported. While the lira unraveled against the dollar in the last quarter of 2021, cryptocurrency trading volumes using the lira leapt to an average $1.8 billion a day across three exchanges, according to blockchain analytics firm Chainalysis.
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Turkey’s inflation climbed to a nearly two-decade high in December on the back of a weakening lira that is driving up the cost of food and other basic goods and destabilizing the wider economy, the Wall Street Journal reported. Annual inflation rose to 36.08% last month, up from 21.3% in November, the Turkish Statistical Institute said Monday—the highest inflation rate since 2002, according to economists. The rampant inflation raises new concerns that it could overwhelm a government rescue plan unveiled last month to stabilize the battered local currency.
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The cost of borrowing money in Turkey is surging, a sign that President Recep Tayyip Erdogan’s policy of driving down interest rates is starting to backfire, Bloomberg News reported. Since the central bank began slashing rates in September, the yield on 10-year government bonds has climbed more than 7 percentage points, touching an all-time high of 24.9% on Wednesday. It stands at more than 10 percentage points above the bank’s benchmark repo, the biggest premium on record.
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Turkey’s currency tumbled against the dollar Wednesday, a setback to the government’s experimental plan to stabilize the currency, the Wall Street Journal reported. The lira fell more than 6% against the greenback, undoing part of the currency’s significant comeback since last week, when Turkey’s government said it would guarantee returns on certain lira bank deposit accounts at a rate similar to those on foreign currency. The plan was aimed at stopping a brutal currency meltdown.
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Turkey’s lira snapped a five-day rally, challenging government assurances that it’s on a more stable footing after measures were introduced a week ago to stem its collapse, Yahoo Finance reported. The currency slipped 7.2% to 11.4665 per dollar as of 6:37 p.m. in Istanbul after trading as weak as 11.5831 earlier. The decline took the lira’s drop this year to more than 35%, the sharpest depreciation of any emerging-market currency during 2021.

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President Recep Tayyip Erdogan’s government announced extraordinary measures to bolster the Turkish lira, including the introduction of a new program that will protect savings from fluctuations in the local currency, Bloomberg News reported. The government will make up for losses incurred by holders of lira deposits should the lira’s declines against hard currencies exceed interest rates promised by banks, Erdogan said after chairing a cabinet meeting in Ankara.
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President Recep Tayyip Erdogan pledged to continue interest rate cuts that have made the Turkish lira the world’s worst performing currency over the past three months, referring to Islamic proscriptions on usury as a basis for his new policy push, Bloomberg News reported. “What is it? We are lowering interest rates. Don’t expect anything else from me,” Erdogan said Sunday in televised comments from Istanbul. “As a Muslim, I’ll continue to do what is required by nas,” Erdogan said, using an Arabic word used in Turkish to refer to Islamic teachings.
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Turkey’s minimum wage will rise 50% in 2022 to help offset living costs that have surged as the central bank unleashed a series of lira-weakening interest-rate cuts to support President Recep Tayyip Erdogan’s push to rewire the economy, Bloomberg News reported. The monthly net minimum salary will be 4,250 liras ($275), Erdogan said during a televised press conference. In 2021, it stood at 2,826 liras, a figure that converted to $380 at the start of the year but has fallen to $186 with the lira’s 51% depreciation.
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The signs of Turkey’s disastrous economy are all around. Long lines snake outside discounted bread kiosks. The prices of medicine, milk and toilet paper are soaring. Some gas stations have closed after exhausting their stock. Angry outbursts have erupted on the streets. “Unemployment, high living costs, price increases, and bills are breaking our backs,” the Confederation of Progressive Trade Unions said last month.
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Turkish policy makers failed to arrest the lira’s free fall with their third intervention this month as the currency quickly resumed losses amid an interest-rate policy seen as too loose by markets, Bloomberg News reported. The monetary authority said Friday it sold foreign exchange because of “unhealthy” price formations, echoing President Recep Tayyip Erdogan’s words to describe the recent turbulence. While the lira rebounded briefly, it slid back closer to 14 per dollar, near levels that sparked all the three interventions.
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