The Turkish lira hit a record low of 19.70 against the U.S. dollar on Tuesday as the presidential election is heading to a runoff on May 28 after Sunday’s inconclusive vote.
In the open market, the exchange rate went as high as 22 liras per dollar on Monday before falling back to 20.25 on Tuesday.
“Turkish assets have been losing value these past five years. But since the pandemic, an important part of these losses are due to domestic political and economic developments,” Murat Tufan, an analyst for the financial TV channel Ekoturk, told Xinhua.
“The Central Bank’s efforts to control inflation by lowering interest rates did not pan out, and the dollar exchange has blown up,” he said.
Turkish people have long been suffering high living costs triggered by a soaring inflation rate, which hit a 24-year high of 85.5 percent in October of last year before falling back to 43.68 percent in April.
“This past year, we’ve been discussing what decision will come out of the ballot box … Market pricing shows there is demand for normalization, for a return to orthodox fiscal policy,” Tufan said, explaining the unusual discrepancy between the exchange rate at banks and in the open market.
Turkish President Recep Tayyip Erdogan has been employing unorthodox policies such lowering interest rates, claiming such policies will bring down inflation despite the objections of many financial experts.
“If there isn’t normalization in fiscal policy, if institutions aren’t allowed to operate independently, or market-friendly steps aren’t taken, then the Turkish lira will continue to lose value and reach 25-27 liras per dollar after the (runoff) election,” Tufan said.
The benchmark BIST-100 Index at the Istanbul Stock Exchange dropped 6.38 percent on Monday.
Türkiye’s election watchdog has announced that the presidential election will go to a runoff as no candidate secured more than 50 percent of vote in Sunday’s initial round. ■