Turkey's lira plunges over 7%, hits record low of 23.1 against US dollar

Turkey’s lira declined over 7% to a record low on Wednesday as the new-elected government  seemingly relaxed stabilizing measures while shifting towards more orthodox policies with reports that the state lenders ceased dollar sales.

The lira was at around 22.98 against the dollar, after touching a record low of 23.16 earlier. It has lost over 19% this year so far. 

The losses in the currency deepened since President Tayyip Erdogan was re-elected on May 28. In his new cabinet, Erdogan named Mehmet Simsek, a former deputy prime minister, as finance minister. 

Simsek later said economic policy needed to return to "rational" ground, Reuters reported.

Also Read: Mint Explainer: What does Erdogan’s win mean for India and the world?

Meanwhile, markets await the appointment of a new central bank governor who will replace Sahap Kavcioglu, who spearheaded rate cuts under Erdogan’s unorthodox policies.

Under pressure from Erdogan, the country’s central bank had cut its policy rate to 8.5% from 19% in 2021 to boost growth and investment. But that sparked a record lira crisis in December 2021 and triggered inflation to a 24-year high above 85% last year.

Lira’s value has been eroded by 80% in the last five years.

Simsek’s return, who was finance minister and deputy prime minister in 2009-2018, signaled a a shift from the unorthodox rate cuts.

As per a Reuters report, Erdogan is considering appointing Hafize Gaye Erkan, a senior finance executive in the United States, as central bank governor. Erkan met with Simsek in Ankara on Monday.

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(With inputs from Reuters)