USD/TRY has once again set a new all-time high. The pair has been constantly rallying for the past three years. This has devalued Lira to its record lows against the global reserve currency. The upcoming Turkish elections have become very crucial for the fate of its national currency.
On Tuesday, US Dollar to Lira exchange rate rose by 0.3%. The pair formed its new all-time high of 19.509 during its London session. The surge also faded the 0.19% drop during yesterday’s trading session. Let’s take a look at the fundamental reasons behind Lira’s weakness.
Turkish Lira Likely To Remain Volatile This Week
The Turkish nation is set to elect a new government this weekend. The nationwide elections will be held on May 15. The current Erdogan regime will be facing tough opponents as the increased cost of living has significantly affected the popularity of Recep Tayyip Erdoğan.
According to analysts, USD/TRY forecast heavily depends on the outcome of the upcoming Turkish elections. No major change in the regime might mean the continuation of the same unorthodox policies that sent the US Dollar to Lira to record highs.
USD/TRY Needs A Major Policy Shift
Albert Einstein once said, “You cannot solve a problem with the same mind that created it.” This seems pretty much the case for Turkish Lira. The unorthodox policy to keep the rates low despite soaring inflation has broken the back of the Turkish currency.
Therefore, the government needs to take a whole new approach to avoid the devaluation of its currency. If the new government sticks to the old policies, then I won’t be surprised even if USD/TRY surges above 25 in 2023.
I’ll keep sharing my updated outlook on the Turkish Lira in my free Telegram group, which you’re welcome to join.