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Türkiye Lira Flat after Overnight Tumble to Record Low of 19.8 vs Dollar

People walk near Galata Bridge as the sun sets behind Suleymaniye mosque, background right, in Istanbul, Turkey, Thursday, March 9, 2023. (AP)
People walk near Galata Bridge as the sun sets behind Suleymaniye mosque, background right, in Istanbul, Turkey, Thursday, March 9, 2023. (AP)
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Türkiye Lira Flat after Overnight Tumble to Record Low of 19.8 vs Dollar

People walk near Galata Bridge as the sun sets behind Suleymaniye mosque, background right, in Istanbul, Turkey, Thursday, March 9, 2023. (AP)
People walk near Galata Bridge as the sun sets behind Suleymaniye mosque, background right, in Istanbul, Turkey, Thursday, March 9, 2023. (AP)

Türkiye’s lira, which is prone to sharp swings before regular trading hours, was flat early on Friday, after dropping 4.25% to a record low of 19.80 against the dollar overnight.

The lira stood at 18.9575 at 0439 GMT, same as its closing level on Thursday. Overnight, it firmed up some 5.3% to 18.0030 before swinging in the other direction.

Economists are currently weighing the impact of the massive earthquake that hit Türkiye last month.

Presidential and parliamentary elections scheduled for May 14 are adding to uncertainty. They will determine whether Türkiye continues with unorthodox policies under President Recep Tayyip Erdogan or revert to orthodoxy as promised by the opposition.

The lira has been largely stable since August thanks to authorities' heavy hand in the forex market. The Turkish central banks' gross forex reserves declined by about $9.3 billion since the first quake hit in early February.

The currency lost some 30% of its value against the dollar last year due to concerns about monetary policy and the fallout from the war in Ukraine. It had shed some 44% in 2021.

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Türkiye's Central Bank Lowers Key Interest Rate to 47.5%

A girl sells plastic items to people in the Kadikoy district in Istanbul, Türkiye, Saturday, Dec. 7, 2024. (AP Photo/Francisco Seco)
A girl sells plastic items to people in the Kadikoy district in Istanbul, Türkiye, Saturday, Dec. 7, 2024. (AP Photo/Francisco Seco)
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Türkiye's Central Bank Lowers Key Interest Rate to 47.5%

A girl sells plastic items to people in the Kadikoy district in Istanbul, Türkiye, Saturday, Dec. 7, 2024. (AP Photo/Francisco Seco)
A girl sells plastic items to people in the Kadikoy district in Istanbul, Türkiye, Saturday, Dec. 7, 2024. (AP Photo/Francisco Seco)

Türkiye’s central bank lowered its key interest rate by 2.5 percentage points to 47.5% on Thursday, carrying out its first rate cut in nearly two years as it tries to control soaring inflation.
Citing slowing inflation, the bank’s Monetary Policy Committee said it was reducing its one-week repo rate to 47.5% from the current 50%.
The committee said in a statement that the overall inflation trend was “flat” in November and that indicators suggest it is likely to decline in December, The Associated Press reported.

Demand within the country was slowing, helping to reduce inflation, it said.
Inflation in Türkiye surged in recent years due to declining foreign reserves and President Recep Tayyip Erdogan’s unconventional economic policy of lowering rates as a way to tame inflation — which he later abandoned.
Inflation stood at 47% in November, after having peaked at 85% in late 2022, although independent economists say the real rate is much higher than the official figures.

Most economists argue that higher interest rates help control inflation, but the Turkish leader had fired central bank governors for failing to fall in line with his previous rate-cutting policies.

Following a return to more conventional policies under a new economic team, the central bank raised interest rates from 8.5% to 50% between May 2023 and March 2024. The bank had kept rates steady at 50% until Thursday's rate cut.
The high inflation has left many households struggling to afford basic goods, such as food and housing.