The Turkish lira hit a record low on Tuesday, plunging to TL 4.46 to the US dollar, the BloombergHT news website reported.
Following a negative report on the Turkish economy released by US-based global credit rating agency Moody’s, the lira lost value from its morning USD/TL parity of 4.43.
A report from Moody’s helped the currency’s fall by warning that “the potential triggers for a re-evaluation of Turkish country and banking risk by foreign investors continue to multiply,” as quoted by the Financial Times and reported by the Asia Times.
The increased risk is coming “with the continuing deterioration of Turkey’s geopolitical situation, its already strained domestic politics and the prospects of monetary policy tightening in more advanced economies,” the Moody’s report said.
“This overall picture suggests that the risk of an external shock, while still quite low, has increased. This means that the banking system is more susceptible to a loss of investor confidence. In such a scenario, banks would be forced to reduce lending to the economy, with a negative effect on asset risk, profitability and ultimately capital.”
One US dollar was valued at TL 4.22 on May 4.
According to analysts, President Recep Tayyip Erdoğan’s recent interview with Bloomberg news in which he insisted on low interest rates affected the lira negatively in addition to increases in oil prices, burgeoning public spending due to upcoming elections on June 24 and declining macroeconomic trends.
Erdoğan began a three-day state visit to the UK on Sunday, with a busy schedule including a meeting with UK Prime Minister Theresa May and a speech at Chatham House, a highly influential international affairs think tank.
British strategist Timothy Ash commented on Erdoğan’s visit to the UK from an economic perspective, saying he was attempting to attract foreign investors to Turkey and to show his country is still a partner with the West, according to BBC Türkçe.
Ash argued that May is doing Erdoğan a favor ahead of the crucial snap elections, which could result in an end to his tenure.