The Turkish Lira is Close to Erasing Its Gains

The Turkish lira fell for a fifth day in a row today, Friday, hit by high US bond yields, which contributed to erasing almost all of the gains made this year, and paving the way for a potential more difficult battle in the face of double-digit inflation.

The lira fell to 7.7480 against the dollar before recovering to 7.34, only to remain slightly lower during the session. The Turkish currency rose strongly until mid-February, outperforming its counterparts, after ending last year at 7.44.

Turmoil in global bond markets has sparked investor anxiety, with concerns that losses could spark a sell-off driven by anxiety elsewhere. Investors ditched emerging market currencies as 10-year Treasury yields posted the biggest jump this month since 2016.

Analysts say that if the lira’s weakness continues despite Turkey’s adoption of one of the tightest monetary policies in the world, the import-dependent economy may see more upward pressure on inflation already looming at 15%.