Türkiye’s lira has hit an all-time low, falling 7% in its most significant one-day drop since the 2021 crash. This came as the newly elected government appeared to ease currency stabilization measures in favor of more mainstream policies. The lira has been under pressure since President Tayyip Erdogan’s re-election on May 28, with losses of over 19% this year and touching a record low of 23.16 against the dollar on Wednesday (trading at the time of writing at 23.35).
Read more: What awaits Erdogan, Turkish lira, in his new term?
Over the weekend, Erdogan announced his new cabinet, with former Deputy Prime Minister Mehmet Simsek named as finance minister. Simsek, who is widely respected by foreign investors, stated that economic policy needed to be rational. However, the markets are still waiting for the appointment of a new Central Bank governor to replace Sahap Kavcioglu, who led interest rate cuts under Erdogan’s unorthodox policies.
Throughout most of this year, the authorities have been directly involved in foreign exchange markets, spending billions of dollars of reserves to maintain the lira’s stability. Simsek’s return signals a move away from unorthodox rate cuts despite high inflation, while Erdogan is reportedly considering appointing Hafize Gaye Erkan, a senior finance executive based in the United States, as Central Bank governor. Erkan would be the country’s fifth Central Bank chief in four years, highlighting frequent policy shifts under Erdogan.
Despite hopes that foreign investors will return after a prolonged period of exodus, market observers are cautious, given Erdogan’s history of switching to conventional policies only to reverse course shortly afterward.
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