The Turkish lira fell to a historic low of 20 per dollar on Friday, ahead of the presidential election runoff this weekend, which will determine whether President Tayyip Erdogan extends his rule into a third decade.
At 0508 GMT, the lira hit 20.00 versus the US dollar and remained close to that level. It finished at 19.8695 on Thursday and has lost 6.4% this year.
Since the first round of the presidential election on May 14, Turkey’s sovereign dollar bonds and stocks have plummeted, while the cost of insuring exposure to Turkish debt has risen.
Erdogan stated in an interview on Thursday evening that Gulf states recently transferred funds to Turkey, temporarily relieving the central bank and markets, and that he plans to meet and thank their leaders after Sunday’s runoff.
In the first round, Erdogan was considerably ahead of his major competitor Kemal Kilicdaroglu but came just short of the more than 50% needed to avoid a runoff on Sunday.
Forex demand has increased during the election season on anticipation that the lira will continue to fall in value, having lost 44% of its value in 2021 and 30% in 2022.
The lira’s losses this year have mostly been driven by terrible earthquakes in February, which killed over 50,000 people and devastated a significant part of southern Turkey. Since the May 14 election, the lira has fallen 2.1%.
The Turkish central bank’s net forex reserves fell into negative territory for the first time since 2002 on May 19, reaching $-151.3 million, according to official figures released on Thursday.