The lira felt the brunt of a turbulent few days in the build up to the Turkish local elections, which took place yesterday, after the government and central bank unleashed a series of stop-gap support measures. Today the lira fell as much as 2.5 percent against the US dollar, weakening to 5.6997 before coming back slightly to 5.6023 at 11:30AM UK time. This is compared to a close on Friday of 5.5550. The wild swings of the lira have sparked fears of a repeat of the August currency crisis, which led to TRY losing almost 30 percent of its value.
Commerzbank analysts said in a note: “The ruling party is likely to re-double its effort to kick-start the economy.
“But besides this, we do not expect the election outcome to trigger deeper change.
“From a policy standpoint, we should anticipate a wider fiscal deficit as government spending is boosted.
“We should also anticipate measures to relax bank lending norms and efforts to bring down bank lending rates.”
Today’s fall of the lira comes after President Erdogan and AKP lost control of Ankara for the first time since the party’s founding in 2001.
His losses look set to extend further, according to state-run news agency Anadolu, who are reporting that the main opposition’s candidate in Istanbul had a lead of 0.28 percentage points over his AKP rival with 99.8 percent of ballot boxes opened.
Speaking to reporters in Ankara, AKP Secretary General Fatih Sahin said his party would appeal election results in every district of the capital.
He said the AKP would make “significant progress” as a result of these appeals.
In a speech to supporters on Sunday night, President Erdogan appeared to accept AKP defeat in Istanbul.
However, he said most neighbourhoods in the city were held by his party.
He said: ”Even if our people gave away the mayorship, they gave the districts to the AK Party.”
President Erdogan pledged that Turkey would now focus on its troubled economy in the run-up to national elections in 2023.
He told reporters: ”We have a long period ahead where we will carry out economic reforms without compromising on the rules of the free-market economy.”