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Turkish lira plunges to new record low

November 23, 2021

The Turkish lira hit new lows against the US dollar and euro. Analysts place the blame on the low interest rates and the cheap money policies preferred by President Recep Tayyip Erdogan.

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Turkish liras at a currency exchange shop in Istanbul
The Turkish lira sunk 17% against the dollar since just the beginning of last weekImage: picture-alliance/AP Photo/M. Yapici

Turkey's lira weakened to a new record low at 12.73 against the US dollar and 14.31 against the Euro on Tuesday.

The Turkish lira is by far the worst performing emerging market currency this year. It has lost 40% of its value this year, including shedding17% just since the beginning of last week.

Most analysts point their finger at irresponsible monetary easing and low interest rates of the sort championed by Turkish President Recep Tayyip Erdogan who has applied political pressure to the country's central bank.

Inflation puts pressure on Turkish economy

Regular citizens are suffering under the sort of rapid inflation that can unnerve a society. In Turkey this year it has soared to nearly 20% and the currency depreciation has eaten away at people's salary and savings.

Erdogan has defended a recent sharp cut in interest rates and vowed to win his "economic war of independence" even as more orthodox economists eschew his approach.

Erdogan aims to 'boost growth' with lira fall

The former central bank deputy governor Semih Tumen dismissed by Erdogan last month wrote on Twitter, "This irrational experiment which has no chance of success must be abandoned immediately and we must return to quality policies which protect the Turkish lira's value and the prosperity of the Turkish people." 

While the lira tanked, Turkey's main share index shot up 1.5%, likely as international investors sought to capitalize on cheaper exchange rates.

ar/msh (Reuters)