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Turkey Rally Runs Out of Steam as Erdogan Sows Policy Doubts

  • Lira’s drop in past two days is most in emerging markets
  • Turkish leader repeated controversial views on high rates
Updated on

The wheels are coming off the lira’s best start to a year since 2012 after President Recep Tayyip Erdogan rekindled doubts over the direction of Turkey’s monetary policy.

The currency had appreciated more than 1% against the dollar this year -- adding to a 14% rally in the last two months of 2020 -- before Erdogan on Friday repeated his long-held belief that high interest rates fuel inflation. Since then, it has weakened almost 2%, the worst performance out of 24 major emerging-market currencies, and options traders have turned the most bearish on the currency since November.