The Turkish lira dropped by as much as 5 percent against the dollar on Thursday morning, as the country gears up for elections this weekend. The greenback bought 5.569 lira at around 8:45 a.m. London time on Thursday morning, from a level of around 5.33 lira at the close of trade Wednesday. Reuters data showed it fell by as much as 5 percent during morning trade.
The fall comes on the back of dismal central bank figures revealing a dramatic decrease in international reserves. The Turkish central bank’s net international reserves for the week ending March 22 sat at 142 billion lira ($24.7 billion), showing a near $10 billion drop in the first three weeks of March. These are “approaching mission critical numbers,” commented Timothy Ash, a Turkey expert and senior emerging markets strategist at Bluebay Asset Management, in a research note. “IMF (International Monetary Fund) may well be required post election.”
The Turkish currency has undergone a dramatic 24 hours as the government instructed national banks to withhold lira liquidity from the offshore swap market to prevent a steep fall in the lira. The move aims to prevent short selling on the currency ahead of local elections on Sunday that are widely seen as a referendum on Turkish President Recep Tayyip Erdogan. Country analysts and national polls expect losses for Erdogan’s AK Party. The currency plunged by around 30 percent in 2018, in what was a turbulent year for the country.