Turkey's currency fell as much as 15% to a session of low 13.4539 before paring losses. The lira’s 11-day losing streak is now the longest in 20 years, and in November alone, it’s lost almost a third of its value.
The latest selloff came after Erdogan defended his demands for lower borrowing costs that have driven up prices and frustrated investors. They complain monetary policy is becoming increasingly irrational and unpredictable in a country where the president’s influence runs deep.
While most central banks are talking of tightening policy as the global recovery fuels inflation, Turkey has slashed 4 percentage points off borrowing rates since September.
“For investors, Erdogan’s comments mean one thing: There will be no one there for them when inflation continues to take a toll on their assets,” said Ima Sammani, an FX market analyst at Monex Europe.
Erdogan’s comments can largely be seen as abandonment of caution and a sign to markets that the easing cycle is unlikely to end anytime soon.
The Turkish lira’s freefall is shattering all kinds of records as President Recep Tayyip Erdogan’s intensifying campaign for lower interest rates plunges the country deeper into crisis, said Kerim Rota, head of economic policy at opposition Future Party.
Opposition leader Kemal Kilicdaroglu, whose party won control of Istanbul and Ankara in local elections in 2019, on Tuesday called Erdogan “a fundamental national security issue for the Republic of Turkey.”
Erdogan, whose popularity is at an all-time low ahead of elections in 2023, looms large over the central bank. His determination to drive down borrowing costs has pushed Turkey into new territory, with many analysts questioning whether the fallout will affect his grip on power.
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