Turkish Lira Drops 7% to 23.17 against Dollar

The price of the Turkish lira fell today by more than 7%, recording its lowest level ever at 23.17 lira per dollar, after state-run banks temporarily stopped selling hard currency.

The decision of the state banks coincides with what appears to be new instructions from the new (old) Finance Minister Mehmet Simsek, who was reinstated by President Erdogan 5 years after his overthrow in an attempt to win the confidence of foreign investors.

According to sources quoted by Bloomberg, the Minister of Treasury and Finance asked the Central Bank to reduce interventions in the currency market through state banks.

The new economic team is expected to abandon the costly intervention strategy as part of the expected shift towards more traditional policies.

The traditional policies are completely contrary to those believed in by President Erdogan, who has pressed during the past years to cut interest rates sharply despite the huge rise in inflation.

However, Erdogan's policy caused the depletion of the central bank's foreign currency reserves, the rise in inflation again, and the mass exodus of foreign capital.

It is noteworthy that since the May 28 presidential elections, the lira has fallen by more than 13% against the dollar.

Investors are betting that further decline. They expect the dollar to reach 25 pounds within the next three months, or 27 pounds in worse estimates.

The next meeting of the central bank to set interest rates is scheduled for June 22.