The Turkish lira hit an all-time low against the dollar and the euro on Monday, amid high tensions between Turkey and its Western allies.
Read also: Tensions in the Mediterranean: Europe in dispersed order against Ankara
The Turkish lira was trading at 8.04 TRY against the dollar around 0730 GMT, suffering a loss of more than 1% since the start of the day.
Since January 1, the Turkish currency has lost nearly 35% of its value against the greenback.
The pound also posted its lowest level against the euro on Monday, trading near 9.52 against the European currency at 7:30 am GMT.
This new plunge comes as relations between Turkey and its Western allies, in particular France, are strained in particular because of the controversial Turkish drilling in the eastern Mediterranean.
Turkey is also under threat of US sanctions after having recently tested, to Washington's chagrin, a sophisticated anti-aircraft defense system, the S-400, acquired from Russia despite warnings from NATO. of which Ankara is part.
Weaker Turkish lira fuels inflation
The fall of the pound also illustrates the mistrust accentuated in recent years between the markets and Ankara, especially since an attempted putsch in 2016 which was followed by a firm takeover of economic affairs by President Recep Tayyip Erdogan.
Thus, the maintenance or repeated cuts in the main key rate of the Central Bank for a year have stunned economists, who on the contrary urge it to raise its rates to counter inflation.
President Erdogan firmly opposes any hike in interest rates, which he called "the
mother and father of all evils
".
In addition to fueling inflation, the weakening pound is adding to the already crushing burden of foreign currency denominated debt that weighs on many Turkish companies.
Read also: Turkey: Erdogan seeks to reassure as the Turkish lira tumbles
The depreciation of the Turkish lira also reinforces concerns about the capacity of the Turkish economy to recover from the Covid-19 pandemic, which struck as the country was barely recovering from its first recession in a decade.
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