January 24, 2020 / 5:17 AM / a month ago

UPDATE 1-Turkey's Albayrak says lira 'looks competitive' at 5.7-5.9 vs dollar -Nikkei

(Adds details, background)

ANKARA, Jan 24 (Reuters) - The Turkish lira “looks competitive” at a level between 5.7 and 5.9 against the U.S. dollar, Finance Minister Berat Albayrak was cited as saying by the Nikkei newspaper on Friday, adding that financial stability was a matter of “national security”.

A currency crisis in 2018 wiped out nearly 30% of the value of the lira, prompting the government to clamp down on financial markets with new rules and regulations.

The government measures, including curbs on foreign-exchange and reserve requirements meant to boost lending, were aimed at stabilising the currency as the ailing economy recovered from recession. Ankara expects growth to jump to a 5% rate this year, more than most analysts expect.

On Friday, Albayrak said recent developments in the economy showed the currency was at a competitive level against the U.S. dollar. It was trading around 5.93 on Friday.

“When we look at the developments in imports and exports as well as balancing in the current-account deficit, the foreign exchange rate looks competitive,” Albayrak told Nikkei in an interview.

The lira weakened 11% last year, in part due to Turkey’s military incursion in Syria, bringing its two-year losses to 36%. Traders have said state banks had been selling dollars to support the currency through the market turbulence.

Asked if the selling dollars was a way for the government to support the currency, Albayrak said state banks pursed both the public interest and profitability, adding that a switch to a new executive presidential system in 2018 had made the banks more active players in the market.

“All state banks, private banks, central bank and other institutions started to become much more active market players in this new structure as strong stakeholders and acting in a more harmonious and coordinated fashion for financial stability,” Albayrak said.

“Within free market rules, state banks pursue both the public interest as well as profitability and this will continue as such,” he added.

The Turkish central bank said on Thursday policymakers must keep a lid on financial volatility and deliver predictable fiscal policies to keep the economic recovery on track, adding that its own policy will depend on further disinflation.

The bank has cut its key interest rate to 11.25% from 24% since July on the back of a stabilisation in the lira and a drop in inflation, which was 11.8% in December. The lira stood at 5.9380 at Thursday’s close. (Reporting by Tuvan Gumrukcu and Jonathan Spicer; Editing by Clarence Fernandez & Kim Coghill)

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