The lira slumped to a record as Turkey’s current-account deficit widened to a four-month high and Prime Minister Recep Tayyip Erdogan called a corruption probe that’s roiled markets an “unethical coup.”
The currency weakened 0.4 percent to 2.1881 per dollar at 5:04 p.m. in Istanbul, after touching an all-time low of 2.1974 earlier. The lira has lost 1.8 percent this year, the third-most among 24 emerging-market peers after the South African rand and the Argentinian peso. Turkish 10-year bond yields rose for a second day and the Borsa Istanbul 100 Index slid 0.8 percent.
The current-account shortfall widened to $3.9 billion in November from $2.9 billion the previous month, according to a statement on the central bank’s website. While the result beat the $4.3 billion median estimate of economists in a Bloomberg survey, lira weakness accelerated in December amid the graft probe implicating the sons of three ministers and a bank chief, making imports more expensive.
The data “just affirms that the pace of improvement is just not moving fast enough to quickly eradicate concerns over Turkey’s key Achilles’ heel,” said Tim Ash, chief economist for emerging markets at Standard Bank (STAN) Group Ltd. in London. The lira “looks set to go weaker still” until the central bank tightens monetary policy “in a more meaningful way,” he said.
The currency, which has fallen to successive records since the probe came to light on Dec. 17, lost 6 percent in December, the worst month since September 2011. It fell as much as 0.9 percent to 3.0063 per euro today, an all-time low on a closing basis.
Groups backing a graft probe are seeking to damage the economy and force an interest-rate increase, Erdogan said in parliament today. Turkey’s central bank pledged on Dec. 24 to sell at least $6 billion for liras by the end of January to support the lira.
The current-account gap probably increased to 7.1 percent of gross domestic product in 2013 from 6.1 percent a year earlier, according to government projections. The deficit widened 28 percent to $56 billion during the first 11 months.