The lira dropped as much as 0.8 percent to 6.003 per dollar in thin trade, briefly passing a key psychological level and extending this year’s losses to almost 12 percent. It was down 0.7 percent at 5.996 per dollar at 10:41 a.m. local time in Istanbul.
Turkey’s election board could decide as early as Monday on a request by President Recep Tayyip Erdoğan’s governing party to re-run the election for Istanbul mayor, held on March 31 and won by opposition candidate Ekrem Imamoğlu. The board will meet at 2:30 p.m. local time in Ankara to consider allegations of fraud and other irregularities, Sabah newspaper reported.
Losses for the lira -- the currency is trading at its lowest level in almost seven months -- were exacerbated on Monday after U.S. President Donald Trump warned that the United States could more than double trade tariffs on China. The threat hit emerging market currencies across the globe.
Traders have said that the lira, which suffered a currency crisis last summer, could weaken to 6.2 per dollar should the key level at 6 per dollar be breached.
The lira lost 28 percent of its value last year, hitting a record low beyond 7.2 per dollar in August, fueling concerns for a full-blown financial crisis.
Concerns over politics prompted ratings agency Fitch to keep Turkey’s sovereign rating at a junk ‘BB’ on Friday with a negative outlook, It also cited the central bank’s low foreign currency reserves as a reason.
Turkey’s currency crisis has pushed inflation to almost 20 percent and hurt companies’ ability to repay tens of billions of dollars in foreign currency debt to local banks. The economy has also fallen into a deep recession. Repeat elections for Istanbul could further pressure the lira because they may delay much-needed economic reforms and fuel populist policies, analysts warn.
Turkey, a NATO member, has also refused to drop plans to buy S-400 defence missiles from Russia, hurting its relations with the United States. The decision raises the prospect of more U.S. sanctions on its economy. The currency crisis was sparked by a decision by Trump to impose sanctions on Ankara for its detention of a U.S. pastor. The higher steel import tariffs he imposed still remain in place.
Erdoğan was due to meet with NATO Secretary General Jens Stoltenberg at his palace in Ankara on Monday. Foreign Minister Mevlut Cavuşoğlu and Stoltenberg will hold a press conference.