The Istanbul Stock Exchange suspended trading after the vertical collapse of the Turkish lira, hit by President Erdogan’s decision on Friday to replace central bank governor Naci Agbal. The Turkish currency lost up to 17% against the dollar, and then recovered to around a 15% decline. The lira fell to 8.47 per dollar, before rising slightly to 8.09, touching the all-time low of 8.58 against the dollar reached on 6 November, shortly before the appointment of Agbal himself, who had tried to rebuild the credibility of the Turkish central bank. Agbal is the third governor to be replaced in two years.
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If the Turkish currency does not recover something in the next few hours, it will be the largest single-day collapse of the last 4 years: Sunday’s statements by the new governor Sahap Kavcioglu did not serve to reassure the markets. Kavcioglu was the president of a state bank, a former deputy of the AKP, Erdogan’s party. He was put at the helm of the central bank to replace Abgal, who raised the exchange rate to 19% to keep inflation low: a move that infuriated Erdogan, who has no intention of following strict monetary policies to put back under control. the economy of the country.
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Max Lin, a currency analyst interviewed by Wall Street Journal, argues that the change of governor sent a clear signal that President Erdogan does not want to keep interest rates high to contain inflation: “In the past we have seen the Turkish government replace central bank governors because they were not satisfied with the rate policy of interest practiced by the bank, and now there has been a return to that practice “.