Turkish Lira Opens Sharply Lower After President Erdogan Fires Central Bank’s Chief

The Turkish lira opened sharply lower today after Turkey’s President Recep Tayyip Erdogan shocked markets by unexpectedly firing central bank Governor Naci Agbal on the weekend. While the currency is attempting to recoup losses, it currently is trading far below Friday’s close.
President Erdogan made a surprise decision to replace the Governor at the Central Bank of the Republic of Turkey. The announcement came out on early Saturday when markets were closed, therefore they could react only at the start of today’s trading. The decision followed the substantial interest rate hike on Thursday. Experts consider the firing to be a response to the hike as Erdogan considers himself to be an enemy of high interest rates. While the consensus among experts is that higher rates bring down inflation, he thinks that higher borrowing costs lead to accelerating inflation, which climbed above 15% in Turkey last month. Agbal will be replaced by Sahap Kavcioglu, a former banker and ruling party lawmaker, who shares the President’s views on the relationship between interest rates and inflation.
Markets reacted to the announcement extremely poorly, driving the lira down. Specialists argue that the move shattered investors’ confidence in Turkey’s financial system and can lead to the outflow of capital from the country. Furthermore, it can lead to another currency crisis, driving the lira to new record lows.
USD/TRY traded at 7.9066 as of 11:01 GMT today after closing at 7.2108 om Friday, opening at 8.3264 on Monday, and rising to the session maximum of 8.4776 — the highest level since November 6. EUR/TRY closed at 8.5578 on Friday, opened at 9.8377 on Monday, rose to the daily high of 9.8379 (the highest since October 11), and retreated to 9.4418 later.
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Original from: www.earnforex.com