The Turkish lira dropped to a new record-low today as the conflict between Azerbaijan and Armenia raise geopolitical concerns in the region.

The Turkish currency fell to 7,85 lira per dollar, falling for the third consecutive session and losing the gains it had at the end of last week after the sudden rise in the key interest rate of the central bank. The prices of Azeri and Armenian government bonds in dollars fell for the second consecutive day.

The Turkish lira, which has lost half its value since the big crisis of 2018, is being pounded this year by concerns about declining Turkish foreign exchange reserves and negative real interest rates, with the country’s central bank doing little last week to limit these concerns, as analysts report.

“The trend of deteriorating foreign reserves has been noted for years and was also the trigger for the onset of the lira crisis in 2018,” said Commerzbank analysts. “Last week’s rate hike could have made a difference, but only if it could be considered credible as permanent and reproducible – but it can’t,” they added.

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