Photo: AFP
Photo: AFP

Turkey’s embattled currency rallied briefly after Sunday’s election victory for President Recep Tayyip Erdogan dispelled concerns about growing political uncertainty. But the lira, which has fallen by almost 20% versus the US dollar so far this year, resumed its quest for another record low after the reality facing policymakers set back in.

Turkey’s central bank defied Erdogan’s advice against higher interest rates this month, halting the lira’s slide briefly with a rate increase. But analysts remain concerned about the degree to which the central bank will maintain independence after Erdogan’s victory. The newly empowered president has unnerved investors with his unorthodox calls for lower interest rates despite high inflation.

The lira erased post-election gains of more than 3% versus the dollar, while stocks and bonds also reversed their rally.

Analysts at Morgan Stanley wrote on Monday that they saw the currency heading for fresh record lows, according to Bloomberg.

“So far, there is little to suggest that the election will result in a new macro policy framework, which is required, in our view,” the analysts said. “As such, the election result suggests status quo, which in recent years has not produced positive results for asset prices.”