- USD / TRY jumped at the start of the week to the 8.50 area, close to a record high.
- The lira cut losses but is still down 10% after the central bank chief was fired at the weekend.
The Turkish lira plummeted at the start of the week and stole all the headlines. The change of authorities in the central bank of Turkey generated a shock in the lira, which had an impact on global markets. The USD / TRY moderated the upside in the last hours and returned below 8.00.
After starting with a jump of 18% and approaching the record high, USD / TRY undertook a correction from levels near 8.50 and returned below 8.00. It is trading at 7.91, almost 10% above Friday’s close.
The sharp devaluation of the lira was the market’s response to the Turkish president’s decision to remove Naci Agbal, as governor of the central bank. Under Agbal, interest rates rose significantly and the lira appreciated. His policy to curb inflation and stabilize the lira was criticized by Erdogan and also by who is now the head of the central bank, Sahap Kavcioglu.
It is estimated that there will be a change in the policy of the Turkish central bank, which could begin by canceling the rise of 200 basis points in the reference rate that occurred on Thursday, to 19%. The return of unorthodox measures and a looser policy raises concerns about a worsening balance of payments crisis and further flight of reserves.
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