Turkey’s lira drops to record low against dollar

Turkish equities and country-specific exchange traded fund are among the worst performers among developing economies, and the market continued to sink lower Tuesday after the central bank failed to instill confidence in investors.

The list of nine technical adjustments fell short of investor expectations that Turkey’s central bank would be moving toward simplifying its monetary policy framework, one of the world’s most complex. It stood at 2.8820 at 1113 GMT.

In a statement, the central bank said a backdrop of falling food and energy prices, plus domestic and global market uncertainty had factored in its decision.

“There remains underlying political pressure against a rate hike and the latest inflation data showing weaker core inflation bought the bank some breathing space”, said William Jackson of Capital Economics in London.

Turkey’s government has frequently accosted the central bank this year, saying it’s keeping borrowing costs too high and hurting economic growth, which slowed to 2.3 percent in the first quarter from 2.9 percent for 2014 as a whole.

“During normalization of global monetary policies, the interest rate corridor will be made more symmetric around one-week repo interest rate and the width of the corridor will be narrowed”, the statement said.

The central bank left its main rate unchanged at 7.5 percent, as forecast by economists polled by Reuters. Mr. Basci will also increase flexibility in currency auctions to combat exchange-rate volatility, and take steps to boost dollar liquidity to help private borrowers meet foreign debt requirements.

The currency was also hit hard due to rising political uncertainty in Turkey, after the talks between the ruling AK Party to form a coalition government with the Nationalist Movement Party failed on Monday.

President Recep Tayyip Erdogan is widely expected to call early elections if the Ankara parliament can not form a coalition by Sunday, the constitutionally mandate deadline.

“The strategic plan is disappointing”, Guillaume Tresca, a senior emerging market strategist at Credit Agricole, told Bloomberg.

Chiara Albanese contributed to this article.