Erdogan calls for ‘national mobilization’ to defend lira

A board showing the currency exchange rates of the U.S. dollar and the Euro against Turkish lira is on display at a currency exchange office in central Istanbul, Turkey January 12, 2017. REUTERS/Murad Sezer

ANKARA / ISTANBUL: President Recep Tayyip Erdogan accused Turkey’s enemies Thursday of using currency speculation to try to topple the state and urged the central bank to “thwart these games,” saying it had all the tools it needed after the lira plunged to record lows. Erdogan repeated his call to Turks to sell foreign currency, urging a “sense of national mobilization” against speculators. He evoked last July’s military coup attempt, when people took to the streets to block tanks, and said anybody who helped the nation achieve its targets would be a hero.

“There is no difference in terms of goals between the terrorist with a gun in his hand and a terrorist with dollars and euros in his hands,” Erdogan told to local administrators at the presidential palace in Ankara.

“The goal is to topple Turkey, to make it kneel and stray from its goals. They are using the foreign exchange rate as a weapon,” he said. “Of course, we have some problems, but none of these explain the exchange rate in our country.”

The lira has lost as much as 10 percent against the dollar since the start of 2017, making it the worst-performing major currency of the new year, as concern over political and economic stability is compounded by doubts about whether the authorities will take decisive steps to stabilize it.

It has also lost almost a quarter of its value in the six months since the failed coup attempt.

Economists say the central bank needs to raise interest rates sharply to prevent further weakening. But it is reluctant to make such an outright move, with Erdogan and the government preoccupied by slowing economic growth and eager for lower borrowing costs to spur investment.

“It’s clear that the speculation on the forex rate has no depth. ... Our central bank and other banks must thwart these games. The central bank has the necessary tools and ability to take measures on this,” Erdogan said.

He also took aim at commercial lenders. “Banks should not be involved in other calculations when the survival of the entire nation is on the line. I am also calling to the business world, it is time to invest and create jobs.”

Erdogan, his aides, and some ministers have repeatedly cast the lira’s decline as part of a conspiracy against Turkey by outside powers, drawing parallels with bombings by Daesh (ISIS) and Kurdish militants and the coup attempt.

Pro-government newspaper Yeni Safak said German banks in collaboration with the German secret service were to blame for the speculation against the lira, publishing the headline “Deutsche Bank operation” on its front page.

The central bank took steps to tighten lira liquidity Thursday by encouraging lenders to borrow at a higher rate, taking some pressure off the lira.

It did not open its regular one-week repo auction, through which it usually funds the market at 8 percent, leaving banks to resort to its overnight lending rate of 8.5 percent interest or its late liquidity window at 10 percent. “By taking liquidity measures, the central bank is attempting to raise rates without directly raising the official rates,” said HSBC Asset Management strategist Ibrahim Aksoy.

The lira firmed to 3.7897 to the dollar by 14:00 GMT, after weakening as much as 1.5 percent to 3.9290 in early trade. It hit a record low of 3.9417 Wednesday.

But it was helped by a weaker dollar. The U.S. currency nursed widespread losses Thursday after President-elect Donald Trump said little about his future fiscal policies at a long-awaited news conference.

“The lira may enjoy some very short-term respite and take a breather because of general market conditions and this attempt by the central bank to tighten some of the short-term monetary conditions,” said Cristian Maggio, head of emerging markets strategy at TD Securities.

“But none of that is structural and long term, and the lira will remain skewed to extreme weakness until the central bank decides to hike in large scale on interest rates.”

The economy contracted for the first time in seven years in the third quarter and growth is forecast at 3.2 percent for last year, a far cry from the high single-digit rates on which Erdogan built his reputation as prime minister from 2003-14.

He is keen to prevent the economy losing too much momentum as the country prepares for an expected referendum in the spring on constitutional changes that would create a full presidential system and hand him greater powers.

At its last rate-setting meeting in December, the central bank defied expectations of an increase and left rates on hold. It will meet again to set rates on Jan. 24, with many economists saying it need to make a sharp increase.

Deputy Prime Minister Mehmet Simsek said on Twitter that the bank’s hands were not tied.

“The run on the lira is a glass half empty stance. Even with occasional delays, central bank has acted in the past. It should and will act again,” he said.

Simsek added that the dust would settle on the lira rout and that the fundamentals of the Turkish economy were what ultimately mattered.

A version of this article appeared in the print edition of The Daily Star on January 13, 2017, on page 5.




Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (

comments powered by Disqus



Interested in knowing more about this story?

Click here