Turkish Lira Dips to Record Low Against US Dollar

The Turkish lira plummeted to a new record against the US dollar on Monday, trading above 27 liras per dollar. By midday, it slightly recovered but was still around the 27 mark, reflecting a 30% decline since the start of the year.

The lira-euro exchange rate breached the 30 mark, only to settle later at 29.68. Turkey’s central bank, Türkiye Cumhuriyet Merkez Bankası, had responded to the weakening currency earlier this year by hiking the policy rate from 8.5% in June to 17.5% in July. Despite these efforts, there’s a mounting expectation for even steeper rate hikes to combat the lira’s devaluation and spiraling inflation. In July, inflation reached a startling annualized rate of 47.83%, the first uptick since the prior October.

Analyst Murat Tufan from the EKOTÜRK broadcaster commented that the dollar’s surge against the lira was anticipated, particularly after Turkey’s elections in May. He mentioned the new government’s approach of easing dollar pressure to address inflation and their initiation of rate hikes. Tufan expressed concerns over the eroded confidence in the lira, speculating that if inflation isn’t effectively managed, the public’s trust in the currency might only return in a year or two.