Turkish lira peaks at TL 34 against dollar as markets brace for Powell’s speech
A money changer holds Turkish lira banknotes at a currency exchange office in Ankara, Türkiye, Oct. 12, 2023. (Reuters File Photo)
In a turbulent day for Türkiye’s economy, the Turkish lira briefly hit a record low of ₺34 against the U.S. dollar, reflecting ongoing market concerns.
As global investors await critical signals from Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium, the lira’s volatility underscores the broader uncertainties facing both Türkiye and the global economy.
Rising exchange rates: Turkish lira hits 34 TL/USD
- Turkish lira continues to weaken, with the exchange rate briefly reaching a historic high of ₺34 per U.S. dollar at 11 a.m. today, reflecting heightened concerns over Türkiye’s economic trajectory.
- As of 11:22 a.m., the dollar was trading at ₺33.995, and by 2:40 p.m., it had slightly increased to ₺34.01. The euro also saw fluctuations, peaking at ₺37.83 before adjusting to ₺37.79 in the afternoon.
- The lira has depreciated 0.8% against the dollar this week and 2.4% since the start of August, highlighting the ongoing challenges in stabilizing the currency.
| Currency | Selling Price (₺) | Change | Time |
|---|---|---|---|
| U.S dollar | 34.01 | +0.13% | 14:40 |
| Euro | 37.79 | -0.15% | 14:40 |
| British pound | 44.75 | +0.31% | 14:40 |
| 100 Japanese Yen | 23.37 | +0.15% | 14:37 |
| Saudi riyal | 9.10 | +0.04% | 14:37 |
| Norwegian krone | 3.22 | -0.14% | 14:39 |
| Danish krone | 5.09 | +0.06% | 14:39 |
| Australian dollar | 22.98 | +0.45% | 14:39 |
| Canadian dollar | 25.13 | +0.25% | 14:39 |
| Swedish krona | 3.32 | -0.26% | 14:39 |
How is Borsa Istanbul’s midday performance?
- Borsa Istanbul‘s BIST 100 index fell by 1.35% to 9,787.77 points by the close of the morning session, following an initial slight gain at market open.
- Sectoral losses were widespread, with the financial index down 1.54%, the industrial index 1%, the services index 1.13%, and the technology index 1.52%. Only 10 stocks out of the BIST 100 gained, while 89 saw declines.
- Notably, the most traded stocks included Türk Hava Yolları, Koza Altin Isletmeleri and Türkiye Is Bankasi.
How Fed’s policy uncertainty affect global market
- Global markets are on edge as they await Powell’s highly anticipated speech at the Jackson Hole Economic Policy Symposium. Investors are eager for insights into the Fed’s next steps regarding interest rates.
- Current market predictions show a 24% chance of a 50 basis point rate cut by the Fed in September, down from 30% earlier in the week, as recent data indicates the U.S. economy is still growing robustly.
- Powell’s speech is expected to influence not only U.S. markets but also global economic conditions, with ripple effects on currencies like the Turkish lira.
- In Asia, markets displayed cautious behavior ahead of Powell’s speech, with narrow trading ranges observed across the region. Japan’s Consumer Price Index (CPI) for July rose by 2.8%, above expectations, potentially easing pressure on the Bank of Japan to raise rates. By the close, Japan’s Nikkei 225 was up by 0.5%, while Hong Kong’s Hang Seng, South Korea’s Kospi and China’s Shanghai Composite posted minor losses.
- European markets were mixed, with Germany’s manufacturing PMI for August falling short of expectations at 42.1, while the services sector PMI came in slightly above forecasts at 51.4. The broader Eurozone saw its manufacturing PMI miss expectations, but its services PMI exceeded them.
German banking warns Türkiye over further depreciation
- Commerzbank, a European banking institution headquartered in Frankfurt, Germany, has issued a cautionary note regarding the Turkish lira, predicting further depreciation driven by rising inflation expectations and worsening public perception of Türkiye’s economic outlook.
- Tatha Ghose, a currency analyst at Commerzbank, emphasized that without a prolonged economic slowdown, the Central Bank’s interest rate hikes and regulatory reforms may prove ineffective in stabilizing the Turkish lira.
- Ghose pointed out that significant fiscal tightening would be necessary to control inflation, a move that could deepen economic difficulties.
Looking forward: What will happen
As the Turkish lira continues to struggle, attention will remain focused on both domestic economic policies and global influences, particularly the Fed’s decisions. Powell’s Jackson Hole address could provide crucial guidance on the direction of global monetary policy, potentially impacting markets worldwide, including Türkiye.
