The Turkish lira had dropped off yet another cliff, reaching a new record low exchange rate and losing a quarter of its value opposite the U.S. dollar only since Nov 15. One lira was only worth around 8 cents as of Dec 1 market open. On Sept 1, it had still been worth around 12 cents.
The country's central bank on Wednesday moved to sell foreign reserves to prop up the currency. Turkish President Recep Tayyip Erdogan has nevertheless declined to raise interest rates in order to attract investors to the currency, which would potentially strengthen it. Erdogan has repeatedly stated that low interest rates would support the strengthening of a currency and reign in the high inflation Turkey is suffering despite economist agreeing on the opposite.
In 2018, the lira had taken a deep plunge as well from which it never truly recovered. The currency fell from being valued at around 28 cents to every lira to just 15 cents, before stabilizing at around 19 cents in 2019. Throughout 2020 and 2021, the currency lost value gradually before its newest drop in the last days.
Similar to Donald Trump's policies, Erdogan supports a weak currency to make Turkish products competitive abroad as buying them in lira is cheap for traders from many other countries or currency zones. However, according to the Wall Street Journal, the weakening of the lira has gone too far even for exporters, who are also struggling with the high inflation, making energy and raw materials more expensive, as well as the unpredictability of the Turkish currency situation.
