Turkey’s lira fell as investors increased their bets on deeper cuts to interest rates to soften the impact of the coronavirus on economic activity.
The lira dropped 0.7 percent to 6.38 per dollar at 1:15 p.m. in Istanbul, extending the lowest levels since a currency crisis in the summer of 2018. Most other emerging market currencies also slid. The main BIST-100 index of shares fell 6.2 percent to 89,658 points.
The central bank is set to meet on Thursday to consider the level of interest rates. Policymakers will cut rates by at least 50 basis points to 10.25 percent, according to a Reuters poll published on Monday, with one economist predicting a reduction of 150 basis points. Reuters said it would continue to question economists through the week.
Turkish Treasury and Finance Minister Berat Albayrak said on Monday that the authorities would implement a series of measures to bolster market liquidity and to support various sectors of the economy. President Recep Tayyip Erdoğan will announce the steps this week, Albayrak said on Twitter.
Investors are concerned that despite a series of rate cuts by monetary policymakers in the United States and Europe sparked by the spread of the coronavirus, cutting interest rates too far in Turkey will increase pressure on the lira. They are also worried about the central bank’s political independence, which was severely compromised in July when Erdoğan sacked and replaced its governor for failing to cut rates. Erdoğan has called for single-digit interest rates this year.
The number of confirmed cases of the coronavirus in Turkey has tripled to 18, Health Minister Fahrettin Koca said on Sunday.