Turkish Lira was jolted more than 15 per cent on Monday to near its record-low after Turk President Tayyip Erdogan had ousted the country’s Central Bank Governor over the weekend in an unprecedented turn of event and placed a harsh critic of tight monetary policy as the country’s Central Bank Chair who is anticipated to reverse a recent rate hike, marking off an introduction of third Central Bank Chief in a year and a half.
In point of fact, following a shock overthrowing of Naci Agbal on Saturday, Erdogan had placed Sahap Kavcioglu, a former ruling party lawmaker who shares President Erdogan’s understanding that a higher interest rate could cause inflation, as the Country’s Central Bank Chair.
On top of that, the outrageous dismissal of Naci Agbal came forth just two days after he had raised the Central Bank’s benchmark borrowing cost in a bid to put the kibosh on a sky-scrapping inflation, reviving investors’ opinion that politics had long been tuning up the tone of Central Bank policies in major emerging market economies.
Turkish Lira tumbles to near record-low after Erdogan ousted Central Bank Chair
Meanwhile, as President Erdogan’s latest move to replace Agbal had raised questions over Central Bank’s independence in major emerging market economies, in the day’s FX market had witnessed a torrential sell-off wave of Turkish Lira with the Turkish Treasury bond Yields rising to near two-year peak.
Besides, since the day’s market turmoil had rattled global financial markets and reinvigorated frets of a further deterioration in Turkish economy with a higher living cost amid little job prospects, a Societe Generale analyst Phoenix Kalen was quoted saying that the latest Erdogan move had left Turkey ‘beyond a point of no return.’ Citing statistics, in the day’s currency market opening, Turkish Lira abruptly dropped to 8.4850 against its American peer from its Friday’s closing price of 7.2185, just a notch shy of its all-time low of 8.58 bottomed against the greenback on last November.
Nonetheless, the Turkish currency had recouped nearly half of its losses, trading 9 per cent lower to 7.92 per US Dollar, on late-afternoon European trading after the country’s Finance Minister Lutfi Elvan was quoted saying that the country would stay on its free market legislations.
However, after plunging as much as 15 per cent earlier in the day, Turkish Lira wrapped up 7.6 per cent lower against its American counterpart to 7.7 per US Dollar.