The Turkey lira has dipped 15% to a near all-time low after opening of markets following President Tayyip Erdogan’s decision to fire central bank governor Naci Agbal.
This marks the third time since mid-2019 that President Erdogan has abruptly fired a central bank chief. He has appointed Sahap Kavcioglu, a former banker and ruling party lawmaker.
In a statement on Sunday, Kavcioglu said the bank would focus on permanently lowering inflation, which has been stuck in double digits for most of the last four years.
Erdogan fired Agbal two days after a sharp rate hike that was meant to head off inflation of nearly 16% and a dipping lira.
Economic Analysts say the weekend overhaul could soon reverse the hawkish steps taken by predecessor Naci Agbal, while nudging Turkey toward a balance of payments crisis given its depleted buffer of Foreign reserves.
New Central Bank Chief, Kavcioglu had sought to ease concerns over a sharp selloff in Turkish assets and a pivot from rate hikes, telling bank CEOs that no immediate policy changes are being planned.
He added that any policy change would depend on lowering inflation, which he said was the primary goal.
The currency tumbled to as weak as 8.4850 versus the dollar, from 7.2185 on Friday, back to levels touched in early November when it reached a record of 8.58. It last changed hands at 8.0749.
Westpac senior currency strategist Sean Callow said the lira is being smashed by investors fearing that the custodian of its value does not share their hopes for a stable currency.
He added that the lira may not yet have found a bottom and that the real test would be when the volume comes in in Europe.
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