Turkish lira hits new dollar low after election

AFP , Wednesday 7 Jun 2023

The Turkish lira sank to a new low against the dollar on Wednesday, more than a week after the re-election of President Recep Tayyip Erdogan.

FILE- A resident counting Turkish lira banknotes in Sultangazi district of Istanbul. AFP


The currency, which was propped up by the central bank before the presidential election, fell five percent to 22.77 lira per dollar at around 0645 GMT.

Erdogan was sworn in on Saturday after winning a historic election runoff on May 28 and named a new cabinet appointing market-friendly politician Mehmet Simsek as finance minister.

The former Merrill Lynch economist is known to oppose Erdogan's unconventional policies.

He served as finance minister between 2009 and 2015 and deputy prime minister in charge of the economy until 2018, before stepping down ahead of a series of lira crashes that year.

Simsek said: "We have no choice but to return to rational ground" soon after he took office, a sign of shifting away from the unorthodox policy of lowering interest rates in order to fight inflation.

"Whoever won the election, the expectation was the lira had to go weaker, to a more competitive level," London-based emerging markets economist Timothy Ash said in a note.

Ash said the lira's fall showed the "impact" from Simsek pushing the central bank to have a "rational policy", which means a weaker currency that is competitive.

"We are seeing policy normalisation play out."

Central banks worldwide have been raising rates in efforts to combat inflation.

But Erdogan has long advocated low interest rates in a bid to stimulate growth. He once called high rates "the mother and father of all evil" promoted by a foreign "interest lobby".

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