Turkey Faces Threat of Financial Crisis after Lira Plunges against Dollar

THE GUARDIAN: Central bank forced to defend currency as traders respond to interest rate cut with sharp selloff

A customer at a bureau de change in Istanbul over the weekend. The lira was trading at almost 15 to the dollar at one point on Monday. Photograph: Serkan Senturk/Zuma Press Wire/Rex/Shutterstock
Fears that Turkey is on course for a full-scale financial crisis have intensified after the lira plunged to fresh lows against the US dollar.

Turkey’s central bank was forced to step in to defend the ailing currency – selling US dollars for lira – after the latest sharp selloff.

The lira was at one stage trading at almost 15 to the dollar as currency dealers contemplated the prospect of the latest in a series of interest rates cuts demanded of the central bank by the country’s president, Recep Tayyip Erdoğan.

Erdoğan’s insistence that the central bank should keep reducing the cost of borrowing despite annual inflation running at 20% has led to the value of the lira halving during 2021. » | Larry Elliott, Economics editor | Monday, December 13, 2021