Turkish Lira crashes to lowest point

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The Turkish Lira hit an unprecedented low against the euro during the week with ECB reporting a closing price of one euro to 8.90 Turkish Lira while trading platform xe.com recorded a low of 8.97 on Friday.

This is the lowest the Turkish Lira has reached since its introduction in January 2015 when it replaced the old Turkish Lira. One new Turkish Lira was equal to 1 mln old Turkish Lira.

The lira has been steadily declining this week, following a sharper drop in its value after rating agency Moody’s downgraded Turkey’s credit rating to “B2” from “B1” on 11 September.

On the day of the downgrade, the Turkish Lira dropped from 8.83 the previous day to 8.86 and 8.89 on Monday 14 September.

The Turkish Lira has been in trouble for some time now with Moody’s downgrade on 11 September setting in motion an avalanche of downgrades.

Overall, the lira has lost 21% of its value this year as the Turkish economy takes another hit, as Moody’s on Monday downgraded a total of 13 banks.

The credit rating agency said that Turkey’s external weaknesses will likely result in a balance of payments crisis and that financial safety margins are eroding.

Following the banks downgrading, Moody’s on Friday also downgraded some of Turkey’s biggest businesses.

Moody’s Investors Service downgraded the ratings on eight non-financial corporates in Turkey and maintained the negative rating outlooks, noting risks that “follow the weakening of the Turkish government’s credit profile”.

The affected corporates are:

Anadolu Efes Biracilik ve Malt Sanayii A.S. (Efes)

Coca-Cola Icecek A.S. (CCI)

Eregli Demir ve Celik Fabrikalari T.A.S. (Erdemir)

Koc Holding A.S. (Koc Holding)

Ordu Yardimlasma Kurumu (OYAK)

Turkcell Iletisim Hizmetleri A.S. (Turkcell)

Turkiye Petrol Rafinerileri A.S. (Tupras)

Turkiye Sise ve Cam Fabrikalari A.S. (Sisecam)

Koç Holding is the largest industrial conglomerate in Turkey, and the only company in the country to enter the Fortune Global 500 list in 2016.

The company is controlled by the Koç family, one of Turkey’s wealthiest.

Anadolu Efes Biracılık produces and markets beer and non-alcoholic beverages in a wide geographical area comprising Turkey, Russia, the Commonwealth of Independent States (CIS), Europe, Central Asia and the Middle East.

While OYAK, translated into the Army Solidarity Organization in English, is essentially the army’s pension investment fund with some 363,000 members.

OYAK Holding investment subsidiary groups is one of the largest industrial groups in Turkey. They co-own Oyak-Renault, a car manufacturer, and Erdemir, a steel producer.

The latest avalanche of downgrades has not moved Turkey’s President Recep Tayyip Erdogan, a fierce critic of credit rating agencies, as he launched yet another attack on these institutions, following S&P’s recent downgrading of the sovereign.

During a speech he delivered on 13 September at a congress held by his ruling AK Party, Erdogan fired at the agencies.

“You cannot dictate the conditions to Turkey under the sword of sanctions. You did this before. Did you get a result? No, it did not happen. It will not happen in the future.”