ISTANBUL: Turkey’s embattled lira slumped almost five percent to new record lows in value against the US dollar on Wednesday after concern over President Recep Tayyip Erdogan’s new cabinet and his latest comments on interest rates.
The lira was trading at 4.93 to the dollar, a loss of 4.7 percent on the day and appeared at risk of dropping to five liras to the dollar for the first time in history. The fall means it has surpassed the record lows seen last in May ahead of an emergency rate hike by the central bank.
Erdogan on Monday named his son-in-law Berat Albayrak, the husband of his elder daughter Esra, as treasury and finance minister in a cabinet reshuffle for his new term. Albayrak’s surprise switch from the energy ministry spooked financial markets, who were also unhappy to see there was no room for outgoing deputy prime minister Mehmet Simsek, the government’s previous pointman on the economy.
Markets are also concerned that Erdogan underestimates the dangers posed by inflation, which surged to over 15 percent in June for the first time in almost one-and-a-half decades. The president was quoted by Turkish newspapers including the Hurriyet newspaper on Wednesday as saying “we will see a decrease in interest rates,” and warning high interest rates could hurt employment.
But economists are urging tighter monetary policy to fight inflation.
Erdogan has expressed confidence that Albayrak would “set things on the right track”. The lira has now lost 30 percent in value against the dollar this year alone.