Last week, Turkey’s lira sank further against the US dollar, hitting a record 16-year low. On Friday’s session, the lira fell 1% to 3.05 against the American currency. Previously, the dollar/lira pair had hit a new historical low at 3.0615.
Importantly, the Turkish lira has been falling for the 8th week in a row. Except for Ukraine's hryvnia and Brazil’s real, the Turkish lira is the worst-performing emerging-market currency nowadays.
According to experts, Turkey’s national currency is being depressed by the political uncertainty, in particular a leadership vacuum until November’s election. To make things worse, the interim government in Ankara is fighting with Kurdish separatists following the July collapse of a two-year truce with the outlawed Kurdistan Workers' Party, which has triggered hundreds of deaths. So amid the mounting tensions, the country is rapidly losing favor with investors. Foreign investors have withdrawn over $6.88 billion from Turkey’s economy since early 2015.
In addition to domestic troubles, market participants are expressing risk-aversion sentiment on the back of expectations of a first hike in US interest rates in nearly a decade. Actually, the looming US Fed decision is making investors leave all emerging markets. So the Turkish lira remains one of the most vulnerable assets.
