Turkish lira at new record low, leading the drop in EM currencies

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The Turkish lira on Monday fell more than 2 percent against the US dollar, weakening more than any other emerging market currency.

The lira sank to as low as 3.7388 against the greenback due to what market analysts say is a combination of domestic and overseas troubles.

The major depreciation came on the first business day after official data showed a rise in US wages, increasing expectations of a faster tightening by the Federal Reserve. Yet, the currency was already troubled as it lost 3.2 percent of its value last week due to a higher-than-expected domestic inflation rate and security fears as Turkey grapples with recent terrorist attacks.

The lira also hit 3.93 against the euro. Meanwhile, Turkey’s five-year credit default swaps, a useful tool for measuring sovereign risk exposures, rose 3 basis points (bps) to 273 bps from Friday’s closing of 270 bps.

Deputy Prime Minister Nurettin Canikli said on Monday some forces are using manipulations in the financial markets to create volatility in Turkey. The lira has already dropped 4.7 percent in the first days of 2017 alone.

Since the outspoken Donald Trump surprisingly won the US presidential election in early November, emerging currencies have been in decline on expectations that the new president will bring investments home and keep interest rates high.

However, Turkey’s currency has also been struggling due to local dynamics including a military coup attempt in mid-July and the ensuing purges that have sparked concern on the part of human rights advocates around the world.

President Recep Tayyip Erdoğan earlier called on people to sell off foreign currencies to support the lira.

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