The Turkish lira weakened to a record low of 3.9470 against the dollar on Tuesday, extending losses driven by concerns about Ankara's strained relations with the United States, inflation risks and monetary policy uncertainty. Sonia Legg reports.
A new record low for the Turkish lira - it's fallen 17 percent since September. Short-term government debt yields have also jumped 200 points in the same period. Inflation risks and monetary policy uncertainty are partly to blame. But there are other factors too. (SOUNDBITE) (English) ECONOMIST AT IS INVESTMENT, MUAMMER KOMURCUOGLU, SAYING: "We deem the recent movements in currency as movements inconsistent with micro-dynamics. There are some factors let me give you, for example, examples the first is Turkey's relations with Europe and U.S. actually and you know, uncertainties regarding the Reza Zarrab case." Reza Zarrab is a Turkish gold trader who first appeared in court in the US in April. He's accused of violating U.S. sanctions on Iran - a case Ankara calls a plot against Turkey. Zarrab was due in court again on Monday but the trial was postponed for a week. U.S. prosecutors have also charged a former Turkish economy minister and the head of a mainly state-owned bank. (SOUNDBITE) (English) ECONOMIST AT IS INVESTMENT, MUAMMER KOMURCUOGLU, SAYING: "It seems that the ongoing tension will continue for a while and that will definitely keep lira highly volatile in short run and the medium run we will look at the comments from central bank, central bank's possible actions, you know, mainly the political developments." The central bank's response gave the lira a boost. From Wednesday the weighted average cost of funding will rise by a quarter of a percent to 12.25. The bank's intervention followed comments last week from the President. Tayyip Erdogan said a lack of government intervention was partly to blame for high inflation.