© Reuters. FILE PHOTO: A merchant counts Turkish lira bills in the Grand Bazaar in Istanbul, Turkey
ISTANBUL (Reuters) – It fell 1% on Monday, cutting some gains after a four-month rally as rising U.S. bond yields gave a boost to the dollar and as the finance minister defended his policies. predecessor who oversaw a sharp decline in foreign exchange reserves. The data painted a mixed picture of the economy’s recovery from the coronavirus pandemic with tourist arrivals still in deep depression and confidence in the industry on the rise. Goldman Sachs (NYSE 🙂 and Bank of America (NYSE 🙂 improved their GDP forecasts for 2021. The lira, which has far outperformed its emerging market peers this year, weakened to 7.0275 against the dollar and was at 7.0020 to 1026 GMT. , 0.7% less in the day. Last week it rose to 6.9, the best since August. The dollar rebounded from multi-year lows amid rising expectations for faster economic growth and inflation in the world’s largest economy, putting pressure on the lira. Turkey’s currency has gained more than 20% since the beginning of November, when a new central bank governor and finance minister were appointed, boosting expectations for a tight monetary policy and a more orthodox approach after years of perceived mismanagement. Under former Finance Minister Berat Albayrak, who is President Tayyip Erdogan’s son-in-law, the central bank’s foreign exchange reserves were severely depleted due to costly policy by state banks that sold some $ 128 billion in dollars to back the lira. Late on Sunday, the new Finance Minister Lutfi Elvan condemned recent political criticisms of Albayrak’s policies, saying the transactions that had reduced reserves were aimed at ensuring financial stability amid the volatile pandemic. The central bank under new governor Naci Agbal says it will start rebuilding reserves, which cushion the financial crisis, and that in net terms they fell by around three-quarters throughout 2020. The rating agency Fitch revised Turkey’s outlook to ‘stable’ from ‘negative’ on Friday, citing a more consistent and orthodox policy mix under new leadership that has helped ease short-term external financing risks. Turkey’s economy, hard hit in the second quarter of last year, has recovered well and should register growth for 2020 as a whole. BofA raised its 2021 growth forecast to 4.6% from 4.1% despite what it called signs of a slowdown in the first quarter. Wall Street Bank Goldman raised this year’s outlook for 6% growth from 4%, and also charted an interest rate cut to 16.5% from the current 17% due to the recent strength of the lira. Turkey’s capacity utilization rate fell slightly to 74.9% in February, still well above the decade-low hit in April. Manufacturing confidence in the same period rose to 109.3 points, according to central bank data. In January, Turkey saw less than a third of the tourists from the previous year. Tourism revenue, key to financing the country’s chronic current account deficit, plummeted last year.