Turkish lira falls despite Erdogan's U-turn

Turkish lira / Photo: MIA

The first, rather tentative, moves by Turkey's new economic team in the direction of orthodox monetary policy have led to a 7 percent drop in the Turkish lira to a record low of 23,16 lira to the dollar. Under the new leadership of Mehmet Şimşek, the Ministry of Finance ordered the central bank and state-owned banks to end costly foreign exchange intervention policies as part of the policy shift.

The news was reported by sources close to the decisions who preferred anonymity, while the Bank of Turkey and the Ministry of Finance declined to comment. However, when the Turkish currency began to fall by more than 6 percent, and the exchange rate stood at 23,1734 Turkish lira to the dollar, the Ministry of Finance folded and allowed new interventions in the foreign exchange market. The appointment of Mehmet Simsek, a former Merrill Lynch executive, as the new finance minister has raised expectations that Turkey will return to orthodox monetary policy and end state interventions, leaving the market to determine the value of Turkish securities.

Political and economic analysts point out that Erdogan has allowed the central bank to switch to orthodox monetary policy in the past. Since May 28 and Erdogan's re-election, the Turkish lira has depreciated by more than 13 percent against the dollar.

Investors expect the currency to fall further, with bets giving an 80 percent chance of the Turkish currency falling to 25 lira to the dollar in the next three months and more than a 60 percent chance of a fall to 27 lira to the dollar.

Goldman Sachs now predicts that the Turkish lira will depreciate further in the next 12 months, with its exchange rate against the dollar reaching 28 lira to the dollar, Kathimerini analyzed.

Dear reader,

Our access to web content is free, because we believe in equality in information, regardless of whether someone can pay or not. Therefore, in order to continue our work, we ask for the support of our community of readers by financially supporting the Free Press. Become a member of Sloboden Pechat to help the facilities that will enable us to deliver long-term and quality information and TOGETHER let's ensure a free and independent voice that will ALWAYS BE ON THE PEOPLE'S SIDE.

SUPPORT A FREE PRESS.
WITH AN INITIAL AMOUNT OF 60 DENARS

Video of the day