Turkey’s lira tumbled along with bonds and stocks amid mounting signs local investors are losing faith in the currency ahead of elections later this month.
The lira weakened more than 2 per cent to 5.5791 per dollar, breaking out of a tight range that’s held since November. The yield on benchmark government notes jumped 66 basis points to the highest level since early January and the Borsa Istanbul 100 Index slumped by the most in more than two months. The lira led a retreat among emerging market peers after weak European data stoked fears of a slowdown.
“Not sure what drove this move just now, but more broadly markets are taking notice of locals increasingly hoarding dollars,” said Henrik Gullberg, a strategist at Nomura Plc.
Turkish households and companies bought $4 billion dollars of hard currency in the week ended March 15, the most since 2012, driving their holdings to a fresh record. Runaway inflation is eating away at lira savings and there’s uncertainty over the direction economic policy will take after the March 31 vote.
On Thursday, central bank data showed net international reserves fell $6.3 billion in the two weeks through March 15, more than the scheduled $3.8 billion of external debt payments for the month, fueling speculation that the central bank may be intervening in the currency market.
“Since external debt repayments can’t explain the decline in reserves, markets are assuming there is intervention going on,” Gullberg said.
A central bank spokesman wasn’t immediately able to comment when reached by phone.