Things in Turkey were quiet at the end of last week as the Muslim world celebrated Eid al-Adha, but today at the market open the Turkish lira immediately suffered a 3% decline versus the American dollar.
The Turkish currency recently shocked international financial markets with its weakness. A huge reason for this is the extremely high inflation artificially supported on President Erdogan’s orders. This issue exacerbated amid a disagreement between Turkey and the United States: the U.S. introduced tariffs on Turkish imports in order to convince Turkey to release an American pastor that’s being detained on suspicions of participating in a 2016 military coup. This added more pressure on the already weakened lira and resulted in panic on the market.
Although the Turkish central bank is not allowed to increase interest rates by the President, they tried to force banks to borrow money at night, when they can charge them higher rates, thereby acting as if interest rates were increased. This helped to bring the lira down to 6.0 but today the markets opened as if none of the recovery had happened. Right now it seems that the Turkish lira would continue to depreciate.
