Turkish lira is at its lowest level since December crisis

On Tuesday, the Turkish lira fell as low as 17.579 against the US dollar. The dollar’s strength and concerns about rising domestic inflation and low-interest rates pushed the currency to its weakest levels since a major currency crisis in December.

Since the historic crash last year, the central bank has used its foreign exchange reserves to stabilize the lira, which is still down about 25 percent this year after falling 44 percent in 2021 to become one of the worst performing currencies in emerging markets.

Unconventional interest rate cuts late last year sparked a crisis that pushed inflation to nearly 80 percent in June.

Over the past months, the government and the central bank have intensified measures to curb the depreciation of the foreign exchange rate, including placing restrictions on lending companies with more than $1 million in foreign currency cash and implementing a state-backed foreign currency deposit scheme.

A Reuters poll on Thursday showed that the Turkish central bank’s monetary policy meeting is set to keep the benchmark interest rate at 14 percent for the sixth consecutive time, despite slowing economic growth globally and annual inflation reaching a 24-year peak.

A separate Reuters poll showed inflation was expected to fall to around 70 percent by the end of the year.

More broadly, emerging markets are under pressure as investors flee to safe assets. As a result of Russia’s invasion of Ukraine, economic pressures from China and growing fears of an economic recession have led to a historic exodus of investors from emerging markets.