In record low, Turkish lira devalues by 7%
2 Min Read
Ever since the reelection of President Erdogan on May 28, the lira has come under pressure.
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A money exchanger counts Turkish lira banknotes at a currency exchange office in Istanbul, Turkey, Aug. 8, 2018 (AFP)
Turkey's local currency plunged by 7%: marking the lira's sharpest daily devaluation since the economic crisis in 2021, as the newly-elected government seems to lose the capacity at stabilizing the currency as it shifts in favor of conventional fiscal policies.
Ever since the reelection of President Erdogan on May 28, the lira has come under pressure. So far this year, the lira has lost more than 19% of its value.
Last week, Mehmet Simsek, former deputy prime minister, was named as finance minister. Simsek had said that the national economic policy needed to revert to rational grounds, after interest rates had been cut under the previous government: as spearheaded by former central bank governor Sahap Kavcioglu who is yet to be replaced.
"We are seeing policy normalization play out, "I think we are seeing the impact of Simsek pushing [the Turkish central bank] for rational policy," said Tim Ash at BlueBay Asset Management.
In 2023, Turkish authorities directly interfered in foreign exchange markets, investing billions of dollars of reserves, to stabilize the lira.
Bankers anticipate that the depreciation of the lira toward its real value will lead to improved market conditions.
"The lira is getting closer every day to a level that will not need to be defended with reserves. I expect losses to continue for a while," a forex trader said.
Read more: Wall Street forecasts big rate hikes to Turkish Lira after elections
Recep Tayyip Erdogan was officially sworn in in early June as President of the Turkish Republic.
The inauguration took place in parliament where his supporters applauded and cheered for the country's longest-serving leader while opposition lawmakers remained seated and silent.
"As president, I swear upon my honor and integrity, before the great Turkish nation ... to work with all my power to protect the existence and independence of the state ... and to fulfill my duty impartially," Erdogan said before lawmakers in parliament.
He also vowed not to lead the nation astray from the rule of law and safeguard the secular principles of the republic.
Read more: Erdogan appoints Ibrahim Kalin head of National Intelligence
