After Erdogan’s re-election, the lira fell, and stocks rose. After President Tayyip Erdogan won Sunday’s presidential election, the lira fell to historic lows against the dollar, but stocks climbed.
In early European trade, the lira fell to 20.065 per dollar, breaking Friday’s record low.
With boom-and-bust cycles and high inflation, the lira has fallen 7% this year and more than 90% over the past decade.
Since the 2021 currency crisis, Turkish authorities have become increasingly involved in foreign exchange markets, with daily swings becoming unrealistically small and largely weakening as FX and gold reserves depleted.
“Erdogan’s victory has seen further pressure on the Turkish lira,” said Rabobank senior macro strategist Benjamin Picton.
Despite years of economic instability blamed on unorthodox economic policies, the opposition had sworn to change, Erdogan won.
The BIST-100 index (.XU100) rose 3.5%, and the banking index (.XBANK) rose more than 1%. Since international asset managers have reduced their holdings, local investors dominate the Turkish stock market.
“An Erdogan win offers no comfort for any foreign investor,” said Tellimer stock research head Hasnain Malik.
“Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy.”
Erdogan’s stunning first-round victory on May 14 caused a selloff in Turkey’s international bonds and a rise in debt insurance rates as economic policy optimism faded.
Last week, Turkey’s dollar bonds fell to a six-month low, and credit default swaps (CDS) surged to a seven-month high.
Turkey’s international bonds and CDS were steady on Monday. Holidays in Europe and the US will reduce trading on Monday.
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