The Turkish lira continued to fall against the dollar on Wednesday, putting pressure on the government of President Recep Tayyip Erdogan who insists on slashing interest rates despite soaring inflation.
The lira shed two percent against the dollar and was trading at 17.1 versus the greenback in the afternoon, not far off the historic lows of more than 18 seen in December.
“The pressure continues to mount on Turkish lira,” said Forex.com analyst, Fawad Razaqzada, in a note to clients.
“President Tayyip Erdogan has once again vowed to continue slashing interest rates despite annual inflation running at more than 70 percent,” the analyst wrote, asking whether the lira might fall even further to 20 versus the dollar soon.
“Investors are also concerned that rising oil prices will just add to Turkey’s inflation misery,” Razaqzada said.
On Monday, Erdogan insisted that his government was opposed to higher interest rates even as inflation in the country soars to its highest level in nearly 25 years.
“This government will not hike interest rates. On the contrary, it will reduce them,” Erdogan said.
Official data showed that inflation in Turkey hit 73.5 percent in May, the highest level since 1998.
The Turkish economy has gone into a tailspin since last year when Erdogan — who is up for re-election next year — put pressure on the central bank to start slashing interest rates.