Turkish banknotes. Photo: iStock
As the lira continues to depreciate, Turks are increasingly feeling the economic strain of their declining purchasing power. Photo: iStock

Asia Unhedged told you to sell Turkish lira yesterday. The embattled currency is down about 1.5%, while President Erdogan declared this morning that Turkish interest rates would fall after the June 24 elections.

Turkey depends on short-term capital flows and interbank loans to Turkish banks to fund a current account deficit of around 6% of GDP, and a cut in interest rates would reduce foreign investors’ incentive to hold lira. Many traders expected Turkey’s central bank to raise interest rates (again) to defend the lira.

Erdogan shattered those expectations this morning, which leaves the Turkish currency out on a limb. We also told you to buy the Russian ruble. That’s up modestly, by about 0.3% overnight.