The Turkish currency fell 1.6 percent to a record low versus the dollar in early Asian trade following President Tayyip Erdogan’s announcement that he has ordered the expulsion of the US and nine other Western countries’ ambassadors.
In early trade, the lira was trading at a new low of 9.85 and has depreciated by 24 percent so far this year.
Bankers blamed Erdogan’s statements for the first weakness.
“I worry … for Turkish financial markets on Monday. The lira will inevitably come under extreme selling pressure,” said veteran emerging market watcher Tim Ash at BlueBay.
“And we all know that (Central Bank Governor Sahap) Kavcioglu has no mandate to hike rates, so the only defense will be spending foreign exchange reserves the CBRT does not have.”
Erdogan announced on Saturday that he had instructed his foreign ministry to dismiss the envoys for seeking the release of businessman and philanthropist Osman Kavala, who has been imprisoned for four years without a conviction.
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