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Lira hits new record low as EP votes to freeze Turkey talks

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The Turkish lira fell to another historic low against the US dollar, declining from around 3.36 to 3.4533 after European parliamentarians overwhelmingly voted to suspend Turkey’s EU membership talks due to undemocratic post-coup practices carried out by the government.

Turkey’s central bank hiked interest rates for the first time in nearly three years in order to contain the lira’s prolonged fall against the greenback, which stemmed from both domestic turmoil and growing expectations for a major currency selloff in emerging markets after Donald Trump’s win in the US presidential election.

Yet, the bank’s move has failed to sustain long-term gains as the currency sank to a new record low against the dollar after the European Parliament vote.

The central bank, in a surprising move that opposed President Recep Tayyip Erdoğan’s support for low rates, raised its benchmark interest rate by 50 basis points on Thursday. While the bank kept the overnight borrowing rate unchanged at 7.25 percent, it increased the overnight lending rate from 8.25 percent to 8.50 percent.

The hike came as the first increase since January 2014 and led the lira to jump from 3.42 to as much as 3.36 against the dollar early Thursday. But the currency weakened and slid back to 3.4533 after the EP voted to freeze talks over Turkey’s bid to join the EU.

A total of 479 deputies voted in favor of imposing a “temporary freeze” on the talks with Turkey, while 37 deputies voted against the non-binding resolution.

The lira was hovering at around 3.4465 at 8:30 p.m., marking the biggest daily loss among emerging currencies. It also declined to as low as to 3.6405 against the euro during the day and pared early losses to edge to around 3.6404.


Emerging market currencies were battered by Trump’s surprise victory on Nov. 8 as the new president is expected to pull investments into the US rather than abroad. Expectations of a rate hike from the US Federal Reserve have also been preventing emerging currencies from gaining strength for some time.


The Turkish lira, in particular, was hurt by a military attempt to topple Erdoğan on July 15 and the ensuing post-coup emergency rule that many call ill-intentioned and disproportionate.


Since July 15, more than 115,000 people — including soldiers, academics, judges, journalists and Kurdish leaders — have been detained or dismissed over their alleged backing for the putsch in what opponents, rights groups and some Western allies say is an attempt to crush all dissent.

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