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Turkish Lira Falls After Erdogan Wins

Turkey’s lira weakened toward a record low after Recep Tayyip Erdogan won a presidential runoff election!

In doing so, Erdogan extended his time as the nation’s longest-serving leader in a tenure that has increasingly alienated foreign investors.

Tweet on turkish lira inflation

Bloomberg tweet on Turkish lira inflation

Stocks jumped and dollar bonds were mixed on Monday as investors awaited the appointment of a new economic team that he promised would have “international credibility,” hinting at a potential turn away from an unorthodox policy mix based on ultra-low interest rates and heavy state intervention in markets.

  • The lira fell 0.6% to 20.10 per US dollar as of 6:10 p.m. in Istanbul, a record low on a closing basis.

Wall Street analysts see more weakness ahead, with Morgan Stanley warning it may slide 29% toward 28 per dollar by the end of the year should Erdogan decline to change course

“An Erdogan win offers no comfort for any foreign investor,” said Hasnain Malik, a strategist at Tellimer in Dubai. “With very high inflation, very low interest rates, and no net foreign reserves, a painful crisis affecting all assets could be on the way.”

The policies have also been expensive, with the central bank spending nearly $200 billion over the past year and a half to prop up the lira, net foreign-exchange reserves turning negative, and inflation soaring above 80% last year before falling to 44% in April.

Source: Bloomberg
Image: Turkish Lira