The Turkish lira fell to a new low before the second round of presidential elections
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The Turkish lira fell to a record low against the US dollar on Friday ahead of the second round of the presidential election. This is reported by Interfax-Ukraine.
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On Friday, the Turkish currency traded at 19.97 lira/$1. At the same time, earlier during trading, the dollar rate rose above 20 lira per dollar.
Meanwhile, the stock index BIST 100 rose by 3.5% after trading on Friday — to the maximum in the last seven working days.
According to the Financial Times, the lira fell by 20% in the last hour. Meanwhile, local banks quote the lira at the level.
Turkish financial markets were surprised by Erdoğan’s unexpectedly high results in the first round of elections on May 14. Polls show that Erdogan remains the favorite in the second round of voting, which will take place on Sunday, May 28.
Anxiety of investors
Investors are increasingly concerned that Erdogan, who has been in office for two decades, will continue his “unconventional economic policy”, which could provoke galloping inflation and a deep drop in the lira.
“We believe that the most likely development path under Erdogan will be the continuation of unorthodox policies characterized by low interest rates, restrictive currency regulation and high inflation,” said Capital Economics economist James Reilly.
Forecast
Analysts say that the lira is likely to weaken significantly after the election if Erdogan does not switch to a more orthodox policy.
Reduction of reserves
Worry is also caused by the reduction of the Central Bank’s reserves, which decreased due to a larger current account deficit of the country’s balance of payments and intervention to support the lira.
Thus, in March-May, gross currency reserves decreased by $9.5 billion to $53.2 billion. By the end of 2022, the reserves amounted to $75 billion.
Author: 
News editor Roman Myronchuk writes on the following topics: Economy, finance, banks, cryptocurrencies, investments, technologies
Source: Ministry of Finance
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