Erdogan on the ropes as value of lira plunges

The value of the Turkish lira plunged to a new low on Monday amid investors’ fears over the consequences of President Recep Tayyip Erdogan’s regional meddling and provocation of the US.

The currency has lost 86 percent of its value since the financial crisis of 2008, and sank to 8.0 against the US dollar on Monday morning, despite repeated state intervention for months.

The decline comes as Erdogan continues to antagonize Europe and the US with his foreign policies, and faces US sanctions after testing the S-400 air defense system purchased from Russia.

“It is quite unlikely that we will see Turkey becoming softer on the S-400, eastern Mediterranean and Nagorno-Karabakh issues,” Sergey

Dergachev, senior portfolio manager at Union Investment in Germany, told Arab News.

“So geopolitical uncertainty will remain in place and, coupled with uncertainty around the US elections, there is a chance that the Turkish lira will lose ground further due to a volatile risk environment.”

Nigel Rendell, director at Medley Global Advisers in London, said the sell-off of the Turkish lira was a direct result of the central bank’s inaction last week, when it continued with its unconventional monetary policy and failed to raise the seven-day local bank lending rate.

“Central banks reap what they sow,” he told Arab News. “Turkey’s central bank sowed confusion and policy uncertainty last week and the’re now reaping yet another major currency sell-off.”