Turkish lira weakens against dollar, attention turns to medium-term plan

ISTANBUL (Reuters) – Turkey’s lira weakened against the dollar on Monday as investors weighed up the impact of last week’s massive rate hike and turned their attention to this week’s announcement of the government’s medium-term economic plan.

At 0555 GMT, the lira <TRYTOM=D3> stood at 6.19 against the U.S. currency, weakening from a close of 6.1725 on Friday, a day after the central bank raised its benchmark rate by 625 basis points.

The currency recovered 4 percent against the dollar last week but was still 39 percent weaker this year in a slide driven by concerns about President Tayyip Erdogan’s influence over monetary policy and a diplomatic row with the United States.

Finance Minister Berat Albayrak will announce Turkey’s medium-term economic progamme on Thursday. He has promised cost-cutting measures and more efficient spending as the economy enters an expected sharp slowdown.

Erdogan said on Friday Turkey was freezing new government investment projects to rein in spending and stem double-digit inflation after a 15-year construction boom fuelled by debt.

Financial markets have long been concerned about Erdogan’s control over monetary policy, which they say has undermined the central bank’s ability to fight inflation, now at 18 percent. He has described himself as an “enemy of interest rates”.

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