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  • In the year The Turkish lira fell as the 2023 presidential election confirmed the victory of Recep Tayyip Erdogan, who extended his term in office to a third decade.
  • The currency was trading at 19.97 against the greenback as of 4 am London time on Monday, after earlier slipping to $20.

A man holding a Turkish flag.

Uriel Sinai Getty Images

In the year The Turkish lira fell on Monday as President Recep Tayyip Erdogan won the 2023 presidential election to extend his term for a third decade.

The currency was trading at 19.97 against the greenback after slipping to $20 earlier in the session.

“We have a positive pessimistic view on the Turkish lira due to Erdogan staying in office after the election,” Wells Fargo emerging markets economist and FX strategist Brendan McKenna told CNBC’s “Squawk Box Asia.”

McKenna predicts the lira will hit a record low of 23 against the dollar by the end of the second quarter and 25 by early next year. It has lost 77 percent of its value against the dollar over the past five years. Turkey’s unconventional monetary and economic policy frameworks are expected to continue in the future.

Turkey’s monetary policy emphasizes growth and export competition rather than taming inflation, and Erdogan supports the unorthodox view that raising interest rates will increase inflation.

“The current arrangement is not sustainable,” said Timothy Ash, senior EM sovereign strategist at BlueBay Asset Management.

“With limited FX reserves and high negative real interest rates, the pressure on the lira is severe,” Ash continued.

The Istanbul Stock Exchange opens at 7 a.m. London time.

“It’s a very poor economic and market outlook for Turkey,” McKenna added.

The “one silver lining” in the general situation is that the Central Bank of Turkey can exchange currency with the countries of the Middle East and China.

“If they continue to draw on those lines and maybe extend and improve those reserve currency lines, maybe there’s some support in central bank FX intervention,” he added.

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