The lira’s plunge against the dollar in 2018 is second only to Argentina’s peso. AFP / Amir MAKAR
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An interest rate hike by Turkey's central bank Thursday might just be the lesser of two evils for the country's beleaguered companies. On the one hand, a steep rate increase could stem the slide in the lira that has boosted dollar-debt costs by more than 40 percent this year. The central bank will probably increase its benchmark one-week repo rate by 325 basis points to 21 percent at its monetary policy committee meeting this week, according to the median of 23 estimates in a Bloomberg survey.Nomura's Demir says a 575 basis-point increase is needed to bolster the currency. "A sequential jump of more than 7 percent in bad debt in June and the rising number of restructuring requests prove the weak lira is taking its toll on nonfinancial corporates," Bloomberg Intelligence analyst Tomasz Noetzel said.These companies have more than $200 billion of unhedged foreign-exchange positions, which might make it difficult for banks to roll over about $100 billion of debt coming due in the next 12 months, he said.
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