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Turkey’s currency prepares for a fall

After years of efforts to keep its currency valuable, Turkey’s government seems to be shifting to a cheaper lira policy in an attempt to boost exports and reduce the country’s gaping current account deficit.
Turkish lira banknotes are seen in this photo illustration taken in Istanbul January 7, 2014. Turkey's lira slipped against the U.S. dollar on Wednesday as the government bond yield curve, which had briefly inverted on Tuesday because of speculation about an emergency rate hike to rescue the currency, returned to a positive slope. Picture taken January 7, 2014. REUTERS/Murad Sezer (TURKEY - Tags: BUSINESS) - RTX1761J
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For years, the Turkish government has stuck to a currency policy that treated the Turkish lira’s value as a matter of national pride. Prime Minister Recep Tayyip Erdogan himself explicitly described the lira’s appreciation as a government objective. In ambitious remarks in 2009, he declared: “The Turkish lira will reach such a level that we’ll deal in Turkish lira on international markets. We are taking steps in this direction.” In 2010, he further said: “The depreciation of the Turkish lira is not something I welcome. I believe that a Turkish lira capable of influencing other currencies will serve better the economy.” Ever since, Turkey has sought to maintain the Turkish lira’s dignity.

However, domestic and external factors triggered sharp fluctuations in the last quarter of 2013 through mid-January, plunging the Turkish lira into one of the world’s largest depreciations in that period.

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