The Turkish lira plunges after report says central bank deputy governor will resign
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- The Turkish lira was down as much as 5% against the dollar Thursday after a report said the deputy governor of its central bank would resign.
- The currency has lost more than one-third of its value within the last month.
- Watch the Turkish lira trade in real time here.
Turkey's currency plunged on Thursday following a report suggesting that the deputy governor of its central bank would resign.The lira was down 5% to 6.7719 against the dollar at 8:45 a.m. ET. It has lost more than one-third of its value this month and is one of the worst-performing currencies of 2018.
The central bank has faced increasing political pressure following the June reelection of President Recep Tayyip Erdogan, who has pushed the institution to pursue unorthodox policies like holding or cutting borrowing costs amid accelerating inflation.On Wednesday, Moody's rating agency downgraded 20 Turkish financial institutions, citing heightened risk to investor sentiment and funding.
"In a downside scenario, where investor sentiment shifts, the risk of a prolonged closure of the wholesale market would lead most banks to materially deleverage, or to require external funding support from the government, or the Central Bank," Moody's said in a statement.The agency said around $77 billion of foreign currency wholesale bonds and syndicated loans, or 41% of total market funding, needs to be refinanced within the next year. Turkish banks hold around $48 billion of liquid assets in foreign currency and have around $57 billion in compulsory reserves with the central bank, which would not be immediately available. An ongoing feud between Turkey and the US has deepened troubles further. President Donald Trump doubled existing tariff rates on Turkish aluminum to 20% and on Turkish steel to 50% earlier this month after the two countries failed to make progress on a conflict over the imprisonment of Andrew Brunson, an evangelical pastor who has been detained in Turkey for nearly two years.
In early August, the Trump administration also imposed sanctions on Turkey's minister of justice and minister of interior, whom the White House said played "leading roles" in the arrest and detention of 50-year-old Brunson. He was arrested in Izmir in 2016 for allegedly aiding a failed military coup, accusations the pastor denies.
Lukman Otunuga, research analyst at FXTM, cautioned to keep an eye on the lira because it represents "a major risk to deterring traders away from investing in any high-yielding assets."
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