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The Turkish President Erdoğan has recently triggered massive changes in the rate of the lira
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TURKISH PRESIDENT PRESS OFFICE HANDOUT / EPA
The following applies to many emerging countries: The value of their currencies is often exposed to large fluctuations, especially shifts on the global financial markets sometimes trigger rapid exchange rate changes.
It is different in Turkey, the most important factor influencing the lira is not located abroad, but domestically, more precisely: in the presidential palace.
Turkish President Recep Tayyip Erdoğan has - once again - triggered a massive fall in the rate of its own national currency with controversial statements. The lira has meanwhile lost eight percent and fell to a new record low. For one dollar, investors had to pay up to 12.49 lira on Tuesday, more than ever before. To put it into perspective: At the beginning of the month the lira was still below the mark of ten against the dollar, at the beginning of the year it was even below eight.
Erdoğan once again fueled the plunge in the lira by defending the drastic interest rate cuts on Monday evening and assuring that he would win his "economic war of independence" despite the widespread criticism. This means that the lira has already lost 40 percent of its value this year, almost 20 percent of which since the beginning of last week. Erdoğan is putting pressure on the central bank to cut interest rates despite inflation of almost 20 percent. He wants to get exports, investments and the labor market going.
Former central bank deputy chief Semih Tumen, sacked by Erdoğan last month, called for an immediate return to policies that protect the value of the lira.
"This irrational experiment, which has no prospect of success, must be abandoned immediately and we must return to a quality policy that protects the value of the Turkish lira and the prosperity of the Turkish people," Tumen wrote on Twitter.
The central bank cut its key interest rate last week from 16 to 15 percent, although the inflation rate climbed to almost 20 percent.
At the same time, a further easing of monetary policy was announced for December.
beb / Reuters
