Turkey’s lira fell against the dollar on Thursday ahead of a meeting of central bank policymakers on interest rates.
The lira dropped 0.5 percent to 7.32 per dollar at 1:20 p.m. local time in Istanbul, taking losses this year to 19 percent.
The embattled currency had reversed losses on Wednesday, gaining more than 1 percent, after President Recep Tayyip Erdoğan promised to announce a “surprise” on Friday that would usher in a new era for Turkey. Erdoğan is set to reveal hydrocarbon discoveries off Turkey’s coastline, media including Euronews and Bloomberg reported, citing unidentified government officials.
Most economists expect Turkey’s central bank to leave its benchmark interest rate on hold at 8.25 percent. Monetary policymakers are under pressure from Erdoğan’s government to keep rates low even as annual inflation hovers around 12 percent.
The lira hit a record low of 7.408 per dollar earlier this week due to concern among investors and some bank deposit holders that the currency does not provide sufficient returns and is set to weaken further.
A lending boom by Turkey’s state-run banks has fuelled demand for imports and widened Turkey’s current account deficit. A slump in foreign investment and tourism revenues means Turkey has fewer funds to finance that gap, increasing concerns for financial and economic instability.
The Institute of International Finance says the lira’s fair value lies at around 7.5 per dollar, citing the negative current account balance.