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Samson: The Turkish lira is under the most severe collapse against the dollar

22nd September, 2020

The Turkish lira fell to a new record low at 7.63 against the dollar today, Monday, with attention shifting towards the central bank meeting scheduled for September 24 and the possibility of further indirect monetary tightening measures, or even an explicit interest rate hike.

The currency has plunged more than 21% against its US counterpart since the beginning of this year.

This decline comes despite the optimistic statements of Turkish President Recep Tayyip Erdogan about the economic situation in the country, as he said that his country has overcome a large part of the effects of the Corona pandemic by continuing production in the third quarter of this year.

Yesterday, Erdogan confirmed that the real estate and auto sectors are setting successive records thanks to the adequate funding provided by the government, explaining that there has also been a noticeable increase in employment since last April, in which Turkey has been most affected by the Corona epidemic, and that his country will conclude the third quarter with a growth rate that satisfies All groups.”

Earlier this month, Moody’s downgraded Turkey’s credit rating from B1 to B2, with a negative outlook, and said that the country’s external weaknesses will likely cause a balance of payments crisis. While Erdogan declared in response that his country’s economy is making strides to the upside, and considered Moody’s rating “worthless.”

Reuters had said that an unprecedented decline in the value of the lira made citizens rush to buy gold due to concerns about the depletion of foreign reserve currencies. Turkish government banks – in cooperation with the Istanbul Gold Foundation (İAR) – developed a gold valuation system that enables Turkish citizens to extract their gold savings from under the pillow into their bank accounts.

The Turkish Treasury and Finance Ministry said Friday before last, that keeping these quantities of gold outside the economy increases dependence on external financing, and leads to the inability of the state to use its full available capabilities.   LINK