The Turkish lira is facing a prolonged currency crisis. The long-term decline was interrupted by a short break. Besides, some analysts assumed that the currency had bottomed out and should rebound considerably, though the collapse continued.
Another lira’s fall against the dollar ended at its new record low. It has never been observed in the past 20 years. The lira hit a low of 12.82 to the dollar. However, the next day, the lira was trading at 11.58 per dollar again. First of all, experts attribute this fact to the official meeting between Turkish President Recep Tayyip Erdogan and Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al-Nahyan. The leaders are planning to discuss the agreement on cooperation between their wealth funds and stock exchanges, which is extremely significant for Turkey.
The market was positive about the announcement of the meeting, though the optimism was temporary. The lira has just nosedived to the bottom again, as well as is going to hover at its lows for a long time. "History shows that the lira tends to rebound from sharp sell-offs once the situation stops deteriorating - even if conditions aren’t improving, but the medium-term trend for the lira will remain to the downside as long as monetary policy is too loose," director of emerging markets at Medley Global Advisors in New York Nick Stadtmiller said.
Erdogan personally regulates the key interest rate and believes that a low key rate will help curb price hikes. This idea contradicts the classic notion of monetary policy regulation. However, the central bank, under Erdogan's guidance, continues to lower the rate. The collapse of the national currency has not affected his beliefs. The president is still confident in his strategy to fight inflation.
