SULAIMANI (ESTA) — Turkish lira crashed nearly 5% to the dollar on Tuesday after Turkish President Recep Tayyip Erdogan defended recent sharp rate cuts.
The lira weakened as far as 12.5 versus the U.S. currency at 1156 GMT.
It has lost 38% of its value this year, including a 17% meltdown since the beginning of last week, according to Reuters.
Erdogan has applied pressure on the central bank to pivot to an aggressive tightening cycle that aims, he says, to boost exports, investment and jobs.
Former central bank deputy governor Semih Tumen, who was dismissed by Erdogan last month, called for an immediate return to policies which protect the lira’s value.
The lira is by far the worst performer in emerging markets this year due mostly to what analysts call reckless and premature monetary easing, Reuters reported. Against the euro, the currency weakened to a fresh record low of 13.4035.
The Turkish central bank cut its policy rate last Thursday by 100 basis points to 15%, well-below inflation of nearly 20%, and signaled further easing.
Erdogan defended the policy in a news conference late on Monday and said tighter monetary policy would not lower inflation.
“I reject policies that will contract our country, weaken it, condemn our people to unemployment, hunger and poverty,” Erdogan said after a cabinet meeting, prompting a late-day slide in the lira.
