Turkish Lira (TRY) Exchange Rate Slides as Mining Disaster Sparks Risk Aversion
On Thursday the Turkish Lira prepared to record its steepest decline against the US Dollar for three weeks.
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The emerging-market asset came under considerable pressure as violence erupted in Turkey in response to this week’s mining disaster.
After the blast in Soma’s mine resulted in the death of almost 300 people, labour unions staged a walkout in protest against sub-standard health and safety.
Protestors took to the street to display their anger and Prime Minister Recep Tayyip Erdogan’s car was swamped.
The appeal of the Lira dropped and the currency shed 0.4 per cent against the US Dollar.
The Lira was also weaker against the Pound.
As currency strategist Thu Lan Nguyen noted; ‘The mining incident has obviously raised political concerns, which is a burden for the Lira, as presidential elections are looming. In my view there is further Lira weakness to come as this is most likely not the last of it, regarding political uncertainty.’
The Presidential elections begin in August.
Meanwhile, data compiled by Turkstat showed that the nation’s unemployment rate eased from 10.5 per cent in February 2013 to 10.2 per cent in the same period this year.
The number of jobless dropped by 16,000, with over 40 per cent of those in work employed in either the agriculture or industrial sectors.
Separate figures showed that Turkey recorded a budget deficit of 2.7 billion Lira in April.
In the same period of 2013 the country posted a budget surplus of 595 million Lira.
The Lira’s declines against the US Dollar were limited by the news that industrial/manufacturing production in the world’s largest economy unexpectedly declined in April.
Industrial production was down by 0.6 per cent while manufacturing output slipped by 0.4 per cent.
However, the ‘Greenback’ was supported as US consumer price index showed a stronger increase in prices than expected and the number of initial jobless claims fell by considerably more than forecast in the week ending May 10.
The Lira is currently trading against the US Dollar in the region of 2.0775 and against the Pound in the region of 0.5970.