At one point on Friday the £ bought 3.19 Lira on the wholesale markets continuing the steady decline in the value of the currency.
The Turkish Lira continued to lose value against strong currencies today. At one point the £ bought 3.19 Lira, on the wholesale markets, before settling at 3.10 Lira. The Lira has weakened by around 5% to the £ in the past week bringing the total to nearly 40% since February.
In an effort to curb the outflow of money from Turkey that is affecting the exchange rate and stock market share values, the Turkish Government announced sweeping tax cuts this week. The changes, which include the abolition of a 15 percent withholding tax for non-residents investing in shares and bonds, provided a brief recovery in Turkish markets, but they later fell.
But investors are driven by 2 things – fear and greed, and it’s fear that is consuming them at the moment. The potential increase in US interest rates, fears over Turkey’s entry into the EU, and the ability of the government to manage tight financial targets in the run up to the election are just a few reasons.
But Turkey desperately needs to draw more foreign investment to help close its gaping current account deficit and raise living standards. The Government recently approved a cut in corporate tax to 20 percent from 30 percent in the hope that it will be more competitive against other emerging markets, especially in Central and Eastern Europe.