Turkey’s lira tumbled to a record low against the euro during the week with trading platforms reporting an all-time low closing price of 9.78 on Friday, coming dangerously close to 10.
This is the lowest the Turkish Lira has reached since its introduction in January 2015 when it replaced the old Turkish Lira. One new Turkish Lira was equal to 1 mln old Turkish Lira.
The Turkish Lira is leading losses across emerging markets in Europe, Middle East and Africa, and was set for its worst month since the 2018 crisis, which forced the central bank to raise borrowing costs by 625 basis points.
Turkey’s currency suffered its worst monthly performance, as it dropped by 8.2% in October against both the EUR and USD.
It had kicked-off the month at 9.04 TRY to a EUR and ended it at 9.78. It also lost 7.9% to the dollar during the month with the dollar valued at 8.37 TRY.
According to analysts, the new drop is weighed by rising coronavirus cases, escalating tensions in the Middle East and uncertainty over the U.S. presidential election.
The currency has been plumbing record lows every day this week as the central bank unexpectedly held lending rates, despite elevated inflation levels in the country.
Turkey’s Central Bank’s latest funding tweaks couldn’t stop the lira from hitting a record low.
The decision to end access to liras from the cheaper Borsa Istanbul repo market was the latest step in the regulator’s bid to tighten policy and bolster the Turkish currency without resorting to an outright policy-rate hike.
Analysts say the rise in coronavirus cases in Turkey has taken its toll as daily cases rose to 2,309 on Thursday, with October closing with a daily average close to 2,000.
Turkey’s COVID-19 case tally now stands at 370,832 and 10,099 deaths.
Geopolitical tensions in the Caucasus and the eastern Mediterranean also exacerbated the lira’s decline, notes Bloomberg.
While one may think that a devaluation of the Turkish Lira could have a bright side as tourism and exports could get a boost, the surge in coronavirus cases has hindered any such hopes.
Recent data showed Turkey’s trade deficit almost tripled in September while foreign visitor arrivals more than halved in the month, indicating further pain for the lira.
Inbound tourism to Turkey has been slashed by 75% during the first half of the year, according to reports.