April 19, 2024

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The Turkish lira continues to slide after Erdogan won the elections

  • The Turkish lira fell to an all-time low on Tuesday, extending its slide.
  • The currency was last traded at 20.15 to the dollar.
  • Earlier, it had touched 20.2 levels for the dollar.

People walk past the Turkish national flag at the historic Grand Bazaar in Istanbul.

cos weights | AFP | Getty Images

The Turkish lira fell to an all-time low on Tuesday, continuing its slide after the re-election of incumbent President Recep Tayyip Erdogan.

The currency last traded at 20.15 per dollar around 5 a.m. Tuesday local time, snapping Monday’s lows. Earlier in the session, it briefly fell to 20.2 levels for the dollar. The lira has lost more than 7% of its value since the beginning of the year.

On Sunday, the Turkish Elections Council confirmed that Erdogan won the 2023 Turkish presidential elections with 52.14% of the vote, while his opponent, Kemal Kilicdaroglu, won 47.86%.

“If a significant weaker move in the lira is to be avoided, and a potential systemic economic crisis is averted, Erdogan needs to move quickly and appoint someone like Simsek as economic officer,” Timothy Ash, senior sovereign strategist at BlueBay Asset Management, said via email. .

Mehmet Simsek was the former Finance Minister of Turkey known for his market-friendly policies. After that, he became the country’s Deputy Prime Minister from 2015 to 2018.

“The question is whether anyone like that will have enough freedom to make the needed economic policy changes – like raising prices,” Ash continued.

Turkish monetary policy focuses on the pursuit of growth and export competition rather than taming inflation, and Erdogan endorses the unorthodox view that raising interest rates increases inflation.

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“There is widespread expectation of that [the lira] “It’s going to weaken in the coming months,” Stephen Englander of Standard Chartered Bank told CNBC’s “Street Signs” program on Monday.

He added that Turkey has “a lot of economic issues” that will intensify after Erdogan’s return to power.

Meanwhile, Goldman Sachs analysts stated in a research report, following the results of the run-off, that the market’s focus will continue to be on the central bank’s reserves of foreign currencies and the lira.

“International reserves have decreased continuously since the beginning of the year and are close to the levels previously seen in the Turkish lira [Turkish lira] Investment bank analysts wrote that volatility increased sharply.