The Turkish lira plunged the most in more than a year to a new record on Wednesday as traders said state lenders halted dollar sales to defend it, in a sign the government’s new economic administration was giving in on costly interventions. The currency dropped about 7 per cent to as low as 23.1621 per dollar, weakening for a 12th straight day. It was trading 6.2 per cent lower at 11:15 am in Istanbul.
President Recep Tayyip Erdogan’s appointment of former Merrill Lynch strategist Mehmet Simsek as treasury and finance minister in his new administration has sparked expectations of a return to a more orthodox economic policy set with reduced state intervention in markets. Since the second-round election on May 28, the lira has weakened more than 12 per cent against the greenback.
Turkey’s state banks don’t comment on their interventions in the foreign-exchange market. A former governor of the central bank said in 2020 that state-owned lenders carry out transactions in line with regulatory limits and could continue to be active in the currency market.
In other Turkish markets, the main stocks index rose 3.1 per cent, extending gains since the vote to 21 per cent and reversing this year’s losses. Turkey’s dollar bonds also extended their advance, with the extra yield investors demand to hold Turkey’s dollar debt over US Treasuries narrowing 44 basis points this week.