Following the Turkish local elections on Sunday 31 March, Turkey’s currency fell sharply on Monday 1 April. Lira has had a turbulent two weeks, first falling significantly on 22 March when it lost 6%. Later, it fell 5% during morning trade on Thursday 28 March after the Turkish central bank released foreign reserve figures. The new figures showed the reserves fell dramatically in March amid central bank’s attempts to contain currency weakness ahead of the local elections. The central bank’s reserves fell almost one-third, close to USD 10 billion.
The latest weakness in lira follows on from a period of relative stability when the currency slightly strengthened between October last year and March, recovering from a sharp decline last summer. Earlier in March, Turkey’s central bank kept its benchmark interest rate at 24%, a move which would show Turkey’s resolve to fight high inflation and which would lend some support to lira.