SULAIMANI (ESTA) — Turkey’s lira hit an all-time low against the dollar on Saturday, two days after the central bank unexpectedly cut interest rates.
Turkish lira stood at 8.8689 against the dollar on Saturday, while the currency closed at a session low of 8.995 per dollar on Friday, compared to its previous record low close of 8.775 in late June.
The central bank’s abrupt move on Thursday to ease monetary policy as Turkish Presidency Recep Tayyip Erdogan has sought, despite a run-up in inflation, sparked an almost 3% drop in the currency this week, according to Reuters.
Foreign investors fleeing the currency drove the fall, but local bargain hunting mitigated the effect, Reuters cited traders as saying.
After a currency crisis in 2018 and a series of smaller selloffs, the lira has shed two-thirds of its value in five years, eating into the earnings of Turks who have also faced double-digit inflation for most of that period.
On Thursday, the lira dove in volatile trading when the central bank slashed its key interest rate by 100 basis points to 18%, despite headline inflation of 19.25% last month, well above a 5% target.
The bank cited core price measurements, which had dipped below 17%, but provided no guidance on policy, Reuters reported.
Barclays, JPMorgan and Goldman Sachs said they expect more rate cuts in coming months.
“This sharp fall in the lira is a clear signal from market participants that the central bank could be making a policy mistake at a time when headline inflation is so high,” said Piotr Matys, senior FX analyst at InTouch Capital Markets.