People walking next to the Turkish national flag within the historic Grand Bazaar in Istanbul
Ozan Kose | AFP | Getty’s paintings
The Turkish lira fell to one other all-time low on Tuesday, extending its decline following the re-election of incumbent President Recep Tayyip Erdogan.
The currency was last traded at 8:15 p.m. against the dollar around 5 a.m. Tuesday local time, breaking Monday’s lows. Earlier within the session it weakened briefly to 20.2 per dollar. The lira has lost greater than 7% for the reason that starting of the 12 months.
The Turkish Election Commission on Sunday confirmed that Erdogan won the 2023 Turkish presidential election with 52.14% of the vote, while his opponent Kemal Kilicdaroglu received 47.86%.
“If he wants to avoid a big weakening of the lira and a possible systemic economic crisis, Erdogan needs to act quickly and appoint someone like Simsek as economist,” said Timothy Ash, senior emerging markets strategist at BlueBay Asset Management. .
Mehmet Simsek was a former Turkish finance minister known for his market-friendly policies. Then he became the country’s deputy prime minister in 2015-2018.
“The query is whether or not any such person could have enough leeway to make needed economic policy changes – akin to rate of interest hikes,” continued Ash.
Turkey’s monetary policy emphasizes the pursuit of growth and export competition slightly than taming inflation, and Erdogan supports the unorthodox view that raising rates of interest increases inflation.
“There may be a widespread expectation that [the lira] will weaken in the approaching months,” Steven Englander of Standard Chartered Bank told CNBC on Monday’s “Street Signs Asia”.
He added that Turkey has “many economic problems” that can intensify after Erdogan’s return to office.
Meanwhile, Goldman Sachs analysts said in a research report that after the outcomes of the second round of elections, the market will proceed to deal with the central bank’s foreign exchange reserves and the lira.
“International reserves have been falling steadily for the reason that starting of the 12 months and are close to the degrees of the previous TRY period [Turkish lira] volatility has skyrocketed,” investment bank analysts wrote.
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