Webdesk: On Friday, the Turkish lira fell to an all-time low against the US dollar ahead of President Tayyip Erdogan’s presidential election runoff.
Before recovering, the currency hit 20.06 against the dollar. It closed at 19.978, a record low. The lira has fallen 6.3% this year, adding to economic worries.
Turkish financial assets have declined since Erdogan won the first round of the presidential election on May 14.
Sovereign dollar bonds and stocks have plummeted, while Turkish debt insurance has risen. Markets fear Erdogan will continue his unusual economic policies, which analysts say have brought Turkey to the brink of an economic collapse.
The Turkish lira’s recent devaluation is mostly due to hopes of Erdogan’s election triumph. Commerzbank FX analyst Tatha Ghose compared the rate of drop to a major crisis, saying many analysts expect an unexpected breakout due to the system’s precarious trajectory.
Erdogan’s government reportedly divided about the economic program’s durability. Some insiders say the current policies being debated.
After years of market interventions to reduce foreign exchange demand, the Turkish central bank’s net FX reserves fell below zero for the first time since 2002.
On May 19, net FX reserves fell to -$151.3 million due to election-related demand. Expectations that the lira’s slide will continue after the election drove demand. The Turkish currency fell 44% in 2021 and 30% in 2022.
President Erdogan said that Gulf governments had lately funded Turkey, which temporarily alleviated the central bank and markets. However, the country’s economic issues and future uncertainty keep investors hesitant and contribute to financial instability in Turkey.
