People walking next to a Turkish national flag at the historical grand bazaar in Istanbul.
Ozan Kose | AFP | Getty Images
The Turkish lira slumped to yet another all-time low Tuesday, extending its slide after the re-election of incumbent President Recep Tayyip Erdogan.
The currency was last trading at 20.15 against the greenback at around 5 a.m. Tuesday morning local time, surpassing Monday’s lows. Earlier in the session, it had briefly weakened to 20.2 levels to the dollar. The lira has lost more than 7% of its value since the start of the year.
Turkey’s Election Board on Sunday confirmed that Erdogan won Turkey’s 2023 presidential election with 52.14% of the votes, while his opponent Kemal Kilicdaroglu received 47.86%.
“If a big move weaker in the lira, and potential systemic economic crisis is to be avoided, Erdogan needs to move fast and appoint someone like Simsek as economic point person,” said BlueBay Asset Management’s Senior EM Sovereign Strategist Timothy Ash via e-mail.
Mehmet Simsek was Turkey’s former finance minister who was known for his market friendly policies. He subsequently went on to become the country’s deputy prime minister from 2015 to 2018.
“The question is whether any such person will have enough freedom to make economic policy changes that are needed — like rate hikes,” Ash continued.
Turkey’s monetary policy places an emphasis on the pursuit of growth and export competition rather than taming inflation, and Erdogan endorses the unconventional view that raising interest rates increases inflation.
“There’s a widespread expectation that [the lira] going to weaken in coming months,” Standard Chartered Bank’s Steven Englander told CNBC on “Street Signs Asia” Monday.
He added that Turkey has “a lot of economic issues” that will intensify following Erdogan’s return to office.
Meanwhile, Goldman Sachs analysts stated in a research report, following the run-off election results, the the focus fpr the market will continue to be on the central bank’s foreign currency reserves and the lira.
“International reserves have continuously fallen since the beginning of the year and are close to levels when previously TRY [Turkish lira] volatility sharply increased,” the investment banks’ analysts wrote.
This story originally appeared on CNBC
