Turkey's lira weakened to a record low against the dollar on Monday, as investors weighed the impact of geopolitical tensions and political influence over monetary policy.
The lira TRYTOM=D3 stood at 8.3840 against the dollar at 0428 GMT, hovering close to its weakest level on record of 8.3850 hit earlier in the day. The currency lost nearly 30% of its value against the greenback this year.
President Tayyip Erdogan said on Saturday that Turkey is waging an economic war against "the devil's triangle of interest and exchange rates and inflation".
Down about 30s% since the start of 2020, the lira was trading at record lows of about 8.53 per dollar and nearly 10 per euro at 5 p.m. in Istanbul Tuesday. The currency’s ongoing devaluation comes amid inflation concerns, recessionary pressures spurred by the COVID-19 pandemic and possible impacts of the US presidential election.
The developments come as the Turkish Statistical Institute (TurkStat) reported Tuesday annual inflation increased to 11.89% in October, up from 8.55% year-on-year. Food costs were among the key drivers of consumer price increases last month, rising 16.5% for the year from 14.95% in September.
Meanwhile, producer prices rose 18.2% year-on-year, the highest rate increase since July 2019. Selva Demiralp, a professor of economics at Koc University and director of the Koc University-TUSIAD Economic Research Forum, said other sectors that registered the highest monthly increases were clothing and home appliances.
“One can see the demand for home appliances and clothing [rising] in anticipation of future price increases due to the anticipated depreciation of the Turkish lira,” Demiralp told Al-Monitor. “In addition, we observed the COVID effect is dragging demand.”
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