Reason of recent fluctuations in dollar/lira rate is speculative news, says Turkish economy minister

Fluctuations in the U.S. dollar/Turkish lira exchange rate are not reflective of the actual strength of the Turkish economy, the country’s economy minister said on Friday.

Speaking at Anadolu Agency’s Editors’ Desk, Nihat Zeybekci said the Turkish Central Bank should not seek to intervene in foreign exchange markets in direct ways, like selling dollars.

"The bank should not touch speculative movements in the markets," Zeybekci said. "This would be the most effective response."

The minister said if the bank intervened by selling foreign currency to a speculative movement, the volume of that movement would increase to a billion dollars from $30-40 million.

His comments came after the climb in the U.S. dollar/Turkish lira exchange rate to 3.84 on Friday – the highest level over the past nine months.

On Thursday, a media report claimed Germany was actively working to cut funds to Turkey from the German-owned KfW bank, European Investment Bank and European Bank for Reconstruction and Development (EBRD).

The dollar/Turkish lira rate saw sharp fluctuations after last year's defeated coup attempt and climbed to its historic high -- around 3.94 liras -- in mid-January this year.

One dollar traded for 3.47 liras on average last month, while the nine-month average dollar/lira exchange rate was 3.60.

According to Turkish Central Bank data, the dollar/lira rate was 3.02 on average last year and 2.71 on average in 2015.

Zeybekci noted fluctuations were not only seen in the dollar/Turkish lira rate but also in other exchange rates, and said: "It is an extremely wrong approach to make an evaluation about the current trend of the dollar/lira rate by relying on speculative news."

"On Thursday, local currencies of some other countries like Hungary, Romania and Poland also depreciated against the U.S. dollar," he said, adding:

"EUR/USD parity climbed to over 1.16, as the euro lost ground against the dollar by losing value of around 1.5 percent yesterday."

Interest rates

Zeybekci also said the Turkish Central Bank’s decision to hold interest rates had been perceived positively.

On Thursday, the bank announced it decided to keep the one-week repo rate -- also known as the bank's policy rate -- steady at eight percent, following a Monetary Policy Committee meeting.

The economy minister also said Turkey’s economy would grow well above six percent in 2017, and “will close the year with an 11-12 percent annual rise in its exports, reaching a historic high record”.

Turkey would see a 30 percent increase in its tourism sector by the end of the year which will contribute positively to foreign direct investments in the country, Zeybekci said.

He underlined that the Turkish economy was better than countries with comparable economies, such as Mexico, Brazil and South Africa.

According to the Turkish Statistical Institute, Turkey's economy grew beyond expectations in the first quarter (5.2 percent) and second quarter (5.1 percent) of this year.

Over the past three years, the country's economy expanded 5.2 percent in 2014, 6.1 percent in 2015 and 2.9 percent in 2016.

Ankara is targeting growth of 5.5 percent this year as well as through 2020, according to the country's medium-term economic program announced on Sept. 27.