On Monday, the Turkish lira plummeted by as much as 7% to a new low at 15 to the dollar, fueled by concerns over President Tayyip Erdogan’s new economic policies and the possibility of another interest rate drop on Thursday.
As the lira fell to 14.99, the central bank launched its fourth market intervention in two weeks, selling dollars, leaving the currency at half of its end-2020 value.
The bank tried to maintain the lira (TRY) below 14 last week, citing devaluation as a source of inflation in a large emerging market economy that relies largely on imports.
“The seeming relative steadiness of TRY last week was illusory and unsustainable. In a note, Commerzbank stated, “We see the build-up pressure unfolding, propelling lira depreciation to the next level.” “Any additional CBT therapies to stabilize TRY are very certainly doomed to fail.”