The Turkish Lira fell as much as 17% against the dollar in Asian foreign exchange markets on Monday following a shocking decision by President Recep Tayyip Erdogan to oust the central bank governor.
The decision to purge Najib Agbal, who had sought to restore the central bank’s credibility, raises concerns that the country will once again follow a path of low-interest rates. Recent policies adopted by the country’s central bank to raise interest rates to combat rising inflation had elevated the currency to a more credible status for trade.
“The optimism was that CBRT was able to keep interest rates high for some time,” Henrik Gullberg of Coex Partners Ltd. told Bloomberg. “This is ruined now,” he said, adding that the currency could now return to levels it was a year ago.