The Turkish lira depreciated to a record 8.15 units per dollar amid investor anxiety over the coronavirus-stricken Turkish economy and President Erdogan’s friction with NATO allies, the BBC reports.
President Recep Tayyip Erdogan angered France and the United States, among others.
Analysts attribute concerns over Turkey’s 11.7% inflation last month to the central bank’s refusal to raise the interest rate, Mediafax writes.
An increase in the interest rate could lower inflation and encourage investors to buy pounds.
President Erdogan’s actions in the region – in Libya, Syria, around Cyprus and the Caucasus – have deterred investors, market analysts say. “The growing geopolitical tensions with the US and the EU are new sources of pressure that are weakening the pound,” said a Turkish currency trader.
Piotr Matys, analyst at Rabobank, said there are fears that a Joe Biden victory in the US election could mean “severe sanctions on Turkey for the acquisition of the Russian S-400 defense system”, but also that “the market is , among other things, also concerned about the rapid deterioration of relations between Turkey and France “.
The pound has lost 26% of its value this year and Turkish authorities have spent around $ 134 billion (£ 103 billion) over the past 18 months to support the currency.
On October 23, President Erdogan confirmed that Turkey had tested the controversial S-400 missile system. Then on Sunday he dismissed US criticisms of the arms deal with Russia, saying, “You don’t know who you’re playing with. Keep your sanctions.”
The US State Department has warned of “potentially serious consequences for our security relations if Turkey activates the system”.