A man sells Turkish flags outside a currency exchange in Istanbul, Turkey. The country’s lira fell more than 7% to record lows on Wednesday, the second major sell-off since President Recep Tayyip Ergodan’s re-election last month. File photo by Sedat Suna/EPA-EFE
June 7 (UPI) — The Turkish lira fell more than 7% to record lows on Wednesday, the second major sell-off since President Recep Tayyip Ergodan’s re-election last month.
The lira’s dramatic jump to 23.16 against the dollar on Wednesday extended its losses to nearly 16 percent. two elections Last month, Erdogan secured a new five-year term over opposition leader Kemal Kiliçdaroglu.
RT Erdogan has been Turkey’s president since 2014, and before that, its prime minister from 2003 to 2014. The lira has lost almost 90% of its value in the last 10 years, and in 2021 experienced a historical catastrophe.
Investors have long viewed Erdogan’s economic policies of ultra-low interest rates and aggressive state intervention in markets as “unorthodox.”
“The Turkish lira fell to an all-time low on market speculation that the country’s finance minister will ease controls that have helped stem the currency’s devaluation,” broker markets.com analyst Neil Wilson said on Wednesday.
Erdogan reshuffled his cabinet over the weekend, choosing former deputy prime minister Mehmet Simsek as the next finance minister, calling for a return to “rational” economic policies.
“We’re seeing policy normalization happening,” said Tim Ash of BlueBay Asset Management. “I think we are seeing Simsek’s efforts for the Turkish central bank to run a rational policy.
RTErdogan did not appoint a new central bank governor to replace Sahap Kavcioglu, who was initially responsible for initiating the rate cut.
Despite the developments, foreign currency traders expect the lira’s losses to “continue for some time” as Erdogan was previously known to have changed his mind on business as usual.
“Even without political intervention, the process of putting Turkey on a sustainable path will be turbulent and likely to involve a significant devaluation,” said Paul McNamara, director of emerging markets debt at asset manager GAM.
“Orthodoxy would include allowing the lira to find a sustainable level without intervention and abandoning the de facto capital controls currently in place,” he said.