The Turkish lira falls 7% in the largest selloff since the 2021 crisis. Turkey’s lira fell 7% to a record low on Wednesday as the newly elected administration appeared to loosen stabilizing measures in its shift to a more conventional policy.
On May 28, President Tayyip Erdogan was re-elected, putting pressure on the lira. 22.98 versus the dollar at 0735 GMT.
It hit a record low of 23.16, losing over 19% this year.
At the weekend, Erdogan selected former deputy prime minister Mehmet Simsek as finance minister. Simsek later called for “rational” economic policies.
Markets are also awaiting a new central bank governor to replace Sahap Kavcioglu, who led rate decreases under Erdogan’s unorthodox policies.
“We are seeing policy normalisation play out,” said BlueBay Asset Management’s Tim Ash.
“I think we are seeing the impact of Simsek pushing (the Turkish central bank) for rational policy.”
For most of this year, authorities have used tens of billions of dollars in reserves to stabilize the lira.
Bankers expect the lira’s gradual devaluation to boost markets and stabilize central bank reserves.
“The lira is approaching a level where reserves are no longer needed. “I expect losses to continue for a while,” a forex trader said, adding that significant intraday losses imply the currency is nearing “expected levels.”
Analysts expect the lira to drop to 25-28 against the dollar.
Comment Template