Investing.com - The Turkish lira fell to the latest in a series of all-time lows against the dollar on Tuesday after the country’s central bank left the benchmark interest rate on hold following its monthly policy meeting.
USD/TRY rose to highs of 2.2694 and was last up 0.84% to 2.2586.
Turkey’s central bank left interest rates unchanged at 4.5%, in a widely anticipated decision. The announcement came amid escalating concerns over the lira’s recent sharp depreciation and worsening inflation expectations.
The central bank has come under pressure from the government to avoid higher borrowing costs in order to promote growth and keep inflation in check. Instead it has tried to shore up the lira through currency market interventions.
On Monday, Turkey’s country’s economy minister called on the bank to leave rates on hold, saying “an increase would have consequences, and would create a permanent bill for our economy.”
Inflation in Turkey rose 7.4% last year, above the government forecast for 6.2%. The government has forecast inflation of 5.3% for 2014. However, Deputy Prime Minister Ali Babacan warned last week that inflation might come in higher than expected because of the lira’s depreciation.
Investor concerns over Turkey’s large current account deficit and political turmoil in the wake of a probe into corruption have prompted a selloff in the currency in recent months.
Emerging market currencies, in particular the lira, have come under heavy selling pressure since the Federal Reserve’s decision to begin scaling back its asset purchase program in December.
Emerging market economies rely heavily on foreign investment to fund their current account gaps.
The lira has fallen to a series of record lows since a wide ranging investigation into alleged bribery was launched on December 17, resulting in the resignation of three cabinet ministers, following their sons’ arrest.
The euro also rose to record highs against the Turkish lira. EUR/TRY hit highs of 3.0687 and was last up 0.62% to 3.0549.