Since the election decision on Sunday, price losses have totaled nearly two percent. Over the past five years, the price has dropped by more than 75%.
On Tuesday, the Turkish lira extended the previous day’s significant currency losses following the election decision. By the end of the morning, as much as 20.35 lira were paid for one US dollar. The Turkish currency has lost just over one percent in value since the previous day. Since the election decision on Sunday, price losses have totaled nearly two percent.
The Turkish currency was also under pressure in trading with the EUR on Tuesday. Sometimes 22.35 lira was paid for one euro here, more than ever. Over the past five years, the price has dropped by more than 75%.
Turkish President Recep Tayyip Erdogan won the decisive second round of presidential elections against opposition leader Kemal Kilicdaroglu. According to Commerzbank’s foreign exchange specialist Ulrich Leuchtmann, further losses in the lira cannot be ruled out after the election decision.
Experts expect more price losses
“It has been very obvious that recently the lira exchange rates were not made by the market but artificially supported the Turkish currency,” Leuchtmann said. Capital controls were introduced in Turkey, which have supported the domestic currency in recent months. Expert Leuchtmann sees the risk that the Turkish lira will no longer be artificially supported as vehemently as before the election.
It cannot be ruled out that the devaluation pressure accumulated in recent months may be dissipated. In recent months, the weak lira has also led to a sharp rise in inflation, which has sometimes surpassed the 80% mark.
“If monetary policy is not foreseeable to change, Turkey cannot be expected to control its inflation problem,” warned Leuchtmann. In the past, President Erdogan had repeatedly spoken out in favor of lowering interest rates in the fight against high inflation and had pressured the country’s central bank to do so. This contradicts the conventional wisdom that high inflation is countered by higher interest rates.
(APA)