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he lira slid on Monday with volatility rebounding, ending a week of relative calm as Turkey’s markets opened after public holidays.The dollar surged as much as 3.7 percent against the lira to 6.2249, with the Turkish currency extending losses as the U.S. trading day got underway. One-month implied lira volatility, a gauge of expected swings in the currency, jumped toward 50 percent after dropping during holidays last week.
The lira has been battered in the past month as the U.S. started imposing sanctions on two Turkish ministers amid a spat over a detained U.S. pastor, adding to investor concerns over the country’s economic and monetary policies. Turkey’s President Recep Tayyip Erdogan has called the turmoil an “economic war” waged by Washington.Read a QuickTake on why the U.S. and Turkey are at oddsInvestor sentiment has been hurt by double-digit inflation, a deepening current-account deficit and policy makers’ reluctance to raise interest rates. While Turkey has raised rates by 500 basis points since April, it needs to boost them further by more than 600 basis points to stabilize markets, according to Societe Generale SA.JPMorgan Chase & Co. has revised its forecast for Turkey’s growth next year to 1.1 percent from 2.8 percent, citing “worsening financial conditions and tighter liquidity conditions,” economist Yarkin Cebeci wrote in a report. “Coordinated policy action by the policy makers could put Turkey on a soft landing path where rebalancing is achieved with manageable collateral damage.”Turkey’s 10-year bond yield slipped 12 basis points to 22 percent, after touching a record high earlier this month.
The lira has been battered in the past month as the U.S. started imposing sanctions on two Turkish ministers amid a spat over a detained U.S. pastor, adding to investor concerns over the country’s economic and monetary policies. Turkey’s President Recep Tayyip Erdogan has called the turmoil an “economic war” waged by Washington.Read a QuickTake on why the U.S. and Turkey are at oddsInvestor sentiment has been hurt by double-digit inflation, a deepening current-account deficit and policy makers’ reluctance to raise interest rates. While Turkey has raised rates by 500 basis points since April, it needs to boost them further by more than 600 basis points to stabilize markets, according to Societe Generale SA.JPMorgan Chase & Co. has revised its forecast for Turkey’s growth next year to 1.1 percent from 2.8 percent, citing “worsening financial conditions and tighter liquidity conditions,” economist Yarkin Cebeci wrote in a report. “Coordinated policy action by the policy makers could put Turkey on a soft landing path where rebalancing is achieved with manageable collateral damage.”Turkey’s 10-year bond yield slipped 12 basis points to 22 percent, after touching a record high earlier this month.
