ISTANBUL- Turkey’s lira slid 15 percent to a near all-time low on Monday after President Tayyip Erdogan’s shock weekend ousting of a hawkish central bank governor sparked fears of a reversal of recent rate hikes, before clawing back some overnight losses.
The appointment of Sahap Kavcioglu, a former banker and ruling party lawmaker, in the early hours on Saturday marked the third time since mid-2019 that Erdogan has abruptly fired a central bank chief.
Kavcioglu sought to ease concerns about a sharp selloff in Turkish assets and a pivot from tight to loose policy, telling bank CEOs on Sunday he planned no immediate policy change, a source told Reuters.
The currency tumbled to as weak as 8.4850 versus the dollar, from 7.2185 on Friday, back to levels touched in early November when it reached an intraday record of 8.58.
It recovered about half of those losses after Finance Minister Lutfi Elvan said Turkey would stick to free market rules, reaching 7.76 at 0620 GMT, 7 percent weaker from Friday.
Goldman Sachs and others had expected a sharp dive in the lira and Turkish assets given the new governor’s dovish and even unorthodox views, and what was seen as the latest damage to the bank’s credibility amid years of policy interference that has dogged the major emerging market economy.