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Turkey’s currency weakens after Erdoğan fires central bank governor

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Turkey’s lira weakened on Monday after President Recep Tayyip Erdoğan dismissed the central bank governor, reigniting concerns about political interference in monetary policy and expectations of rate cuts to revive the recession-hit economy, Reuters reported.

The lira stood at 5.7285 to the US currency at 0933 GMT, 1.6 percent weaker than Friday’s close but off a low of 5.8245 in early Asian trade as investors fretted about the implications of the move for central bank independence.

The lira is down about 8 percent this year after having plummeted 30 percent last year during the currency crisis. The main share index fell 1.14 percent, with banks down 1.7 percent. Turkey’s dollar-denominated bonds dropped across the curve.

Governor Murat Çetinkaya, whose four-year term was due to run until 2020, was replaced by his deputy, Murat Uysal, a presidential decree published early on Saturday in the Official Gazette showed.

Uysal, who has served as deputy governor for three years, is known as one of the more dovish of the bank’s rate setters.

No official reason was given for the sacking, but government sources cited Erdoğan’s frustration that the bank had kept its benchmark interest rate at 24 percent since last September to support the lira.

The Hürriyet newspaper on Sunday quoted Erdoğan as telling a meeting with his party’s lawmakers that he had dismissed Çetinkaya for rejecting the government’s repeated demands to cut rates.

The Turkish economy shrank sharply for the second straight quarter in early 2019 as the crisis, persistent double-digit inflation and high interest rates took a toll on overall output.

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