The Tumult of the Turkish Lira
The Turkish lira has had a volatile year and an especially tumultuous past week. In July, the Central Bank of Turkey alarmed investors by keeping interest rates steady even as CPI annual inflation rose to double digits. Confidence slumped further as the Turkish government encouraged citizens to convert dollars and gold to lira, without success. At the same time, the United States announced an increased tariff on steel and aluminum, to which Turkey responded with a boycott of US electronics and tariffs on a range of other US goods. Investors concerned about the Central Bank’s independence and the growing trade disputes sought calmer markets, prompting the currency to hit a record low of 7.2 TRY to the US dollar on Monday, weakened from 3.8 TRY to USD at the beginning of this year.
The lira has regained some of its value since that low and the Central Bank has promised to take “all necessary measures” to maintain financial stability but the future remains uncertain. We will continue to monitor the situation ahead of our next data review in September.
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