The Turkish lira continues its downward trend on Wednesday morning, falling as much as 7.30% to a fresh record low of 23,20 per dollar, and 24,80 per euro, in its biggest daily selloff since a historic 2021 crash.
USDTRY, Daily chart
After the second round of presidential elections in Turkey on May 28 and the re-election of President Tayyip Erdogan, the Lira has lost nearly 15% of its value against the US dollar and 14% against the common currency, continuing the gradual depreciation.
The Turkish authorities show signs of abandoning efforts to support the bleeding Lira following the election process, after using up tens of billions of dollars of reserves to hold the lira steady in the preview months.
Erdogan's appointment of former Merrill Lynch executive Mehmet Simsek as the country's new finance minister- who is well regarded by financial markets- heightened expectations for a return to more orthodox monetary policy and reduced government intervention in markets.
The return of Simsek, who was finance minister and deputy prime minister from 2009-2018, signaled a move away from the unorthodox rate cuts despite high inflation that has sparked a more than 80% erosion in the lira's value in five years.
Under pressure from Erdogan, a self-described "enemy" of interest rates, the central bank slashed its policy rate to 8.5% from 19% in 2021 to boost growth and investment. But it sparked a record lira crisis in December of 2021 and sent inflation to a 24-year high above 85% last year, before retreating below 40% in May.
Many analysts expect the lira to weaken towards a range of 25-28 against the dollar, with Goldman Sachs revising its forecast to 28 to the dollar over the next 12 months, down from an earlier forecast of 22, according to its June 3 report.
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