The Turkish lira has experienced another collapse, hitting a historical low against the US dollar. Today, October 17, the exchange rate fell to 41.95 per dollar, although it later partially recovered and as of 8:45 AM in Istanbul, it was trading at 41.9477 per dollar. Since the beginning of the year, the Turkish currency has already lost 16% of its value.
This is reported by Finway
Government Efforts and Central Bank Position
Amid the rapid decline, the Turkish government is trying to keep the lira’s losses below the level of consumer inflation. Despite inflation accelerating faster than expected in September, the lira continued to gradually weaken. Economists believe that the country’s central bank has sufficient reserves for an orderly devaluation of the currency and also note the connection between the rate of depreciation and inflation.
“The weakening of the lira is not a surprise – since 2023, the currency has reached a historical low against the US dollar almost daily on average. For investors, two things are important: first, whether the central bank has enough reserves to manage an orderly devaluation; second, the pace of this depreciation. Therefore, we believe that the central bank will strive to maintain the connection between the rates of inflation and the depreciation of the lira. This should lead to a relatively predictable and stable decline, which means high real returns that gradually decrease,” said Emre Akcakmak, senior portfolio advisor at East Capital Group.
Analysts’ Forecasts and Market Impact
Experts at Morgan Stanley believe that the Turkish central bank may slow the pace of devaluation, which would help to curb inflation alongside supporting higher real rates. According to their estimates, in September, annual inflation in Turkey showed acceleration for the first time in over a year.
According to data from the Investing portal, as of 11:40, the exchange rate of the Turkish lira to the hryvnia was 0.9863 UAH. This indicates that Turkey’s national currency remains cheaper than the Ukrainian hryvnia.