??Turkey's lira falls to record-low of 26 per US Dollar!
Turkey Lira hit another All-Time Low as Turkey unwinds FX support mechanism. Lira now down 28% YTD vs Dollar, 2nd worst currency in the world after Argentine Peso which plunged 30% YTD.
The Turkish lira's significant decline, particularly in recent weeks, can be attributed to the aftermath of last month's elections. Since the re-election of President Tayyip Erdogan in late May, the lira has experienced a 28% drop year-to-date. This decline has been largely influenced by President Erdogan's shift away from unorthodox economic policies, which included cutting interest rates despite high inflation. The reversal of these policies has contributed to the challenges faced by the Turkish economy. Monitoring the developments in the economic landscape will be crucial in understanding the implications of these changes.
The central bank, under the new leadership of Governor Hafize Gaye Erkan, increased interest rates by 650 basis points, bringing the rates to 15%. This tightening measure indicates an effort to curb inflation and stabilize the economy. While the rate hike was substantial, it seems to have fallen short of the market's expectations, suggesting that some stakeholders may have anticipated a more aggressive move.
On Sunday, the central bank initiated a process of rolling back certain rules and regulations that were implemented since 2021. These regulations were aimed at heavily managing the debt, credit, and foreign exchange markets, with the intention of promoting lira holdings.
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