Turkey's lira took a 7% nosedive on Wednesday as the country's newly re-elected government appeared to be abandoning its costly 18-month strategy of keeping the currency on a tight leash by any means necessary.
Woman holds Turkish Lira banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustrationon Wednesday as the country's newly re-elected government appeared to be abandoning its costly 18-month strategy of keeping the currency on a tight leash by any means necessary.
Much will depend on whether the central bank now jacks up interest rates in the big way it has done during other bouts of turmoil, or even introduces capital controls - something the authorities in Turkey have long insisted is not on the table. Some of the pain could be offset by the weaker lira spurring exports potentially adding to boost of the upcoming tourism season and the reconstruction spending in the wake of February's devastating earthquake.
Analysts were already expecting it to climb back towards 50% before the latest currency drop and Tellimer's Malik said it might now even snap back to the peak levels of last year as both the free gas ends and the FX moves work through the system.
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