Turkey’s currency, the lira, accumulated 11 days of depreciation against the dollar on Tuesday. Only in the session this Tuesday registered a loss of 16.11% to a level of 12.8299 units per dollar.
In the morning it reached a depreciation of 17.05% and reached a historical price of 13.4539 lira per greenback. This is the biggest daily drop for the lira since August 10, 2018.
On that date, the President of Turkey, Recep Tayyip Erdoğan, accused of an “economic war” and a “plot in the exchange market” to depreciate the lira, which went from 5.55 to 6.43 units per dollar.
The depreciation on Tuesday is a consequence of Erdoğan saying that interest rates should be kept at minimum levels, despite Turkey’s high inflation.
Inflation in Turkey is close to 20% as of October and inflationary pressures persist, making interest rate cuts inconsistent with economic theory.
President Erdoğan’s ideas that inflation is caused by high interest rates have fueled the move in Turkey to cut interest rates by 400 basis points so far this year.
The Turkish lira has spun 11 sessions of depreciation, its longest streak in 20 years. In addition, in the last 10 days the correlation between the Mexican peso and the Turkish lira rose to 94%, due to the contagion effect, according to Banco Base.
“Mexico has almost no commercial relationship with Turkey, but the peso is dragged down when the Turkish lira depreciates,” said Gabriela Siller, director of Economic and Financial Analysis at Banco Base in an analysis. (With information from Agencies)
Reference-www.eleconomista.com.mx