ISTANBUL, Nov 24 (Reuters) - Turkey’s lira touched a record low against the euro and gave up Thursday’s gains against the dollar on Friday as investor concerns persisted over monetary policy and Ankara’s ties with the United States.
The lira weakened as far as 4.6935 against the euro from 4.6441 a day earlier.
Against the dollar it eased to 3.9505, having firmed to 3.90 on Thursday after President Tayyip Erdogan’s chief economic adviser Cemil Ertem told Reuters the central bank could raise interest rates at any time.
“The Turks are talking the talk at present but we are reaching a point that they have to walk the walk and hike rates,” said Blue Bay Asset Management strategist Timothy Ash.
“The longer they delay, the larger the eventual rate hike they will have to deliver, and the more damaging ultimately that will be to the Turkish growth story,” he added.
A series of officials have sought to bolster the lira since it hit a record low of 3.98 on Wednesday. Another economic adviser to Erdogan, Hatice Karahan, added her voice on Friday, rejecting claims of political influence in monetary policy.
“The 400 basis point tightening (this year) shows clearly that there is no political interference,” she told Turkish broadcaster BloombergHT in an interview.
The central bank raised the weighted average cost of funding this week to 12.25 percent after the lira weakness. It stood around 8.3 percent at the start of the year.
“I think the central bank will monitor developments closely in the coming days and may take action in line with this,” Karahan said.
The dollar has surged some 17 percent against Turkey’s lira since mid-September as foreign investor sentiment towards the country has soured, driven by concerns about frosty relations between Ankara and Washington, twin domestic deficits, and Erdogan’s warnings to the central bank.
Fears of political interference in policy are fuelled by Erdogan’s frequent expression of his distaste for high interest rates, calling for lower rates to boost economic growth.
The central bank will hold its next monetary policy committee meeting on Dec. 14 and Ertem said the central bank could hike rates before then if necessary.
The focus of tensions with Washington is the U.S. trial of a Turkish gold trader accused of violating U.S. sanctions on Iran. Ankara has described the case as a “clear plot against Turkey”, accusing U.S. prosecutors of having links to the cleric it blames for a failed coup last year.
The yield on the benchmark 10-year bond stood at 12.47 percent, down from a spot close of 12.75 percent on Thursday. The main share index eased 0.45 percent. (Reporting by Daren Butler and Nevzat Devranoglu; Editing by Dominic Evans)