Following the frantic Cabinet reshuffle by Turkish Prime Minister Erdogan, the lira fell to an all-time low against the dollar on Wednesday.
Although the Turkish central bank increased its efforts to defend the currency, the lira fell from 2.0850 to 2.1035. Stocks and government bonds followed the downward trend as the continuing political upheaval still shakes the confidence of investors in Turkish financial markets.
“The dismissal of half an entire cabinet is worrying enough. The corruption probe is escalating by the day, causing a further deterioration in market sentiment towards Turkey,” said Nicholas Spiro, head of Spiro Sovereign Strategy.
Since the US Federal Reserve’s decision this month to stem the flood of dollars that has boosted global markets, the lira has been beaten down further by the corruption investigations.
On Tuesday, the central bank said it was increasing the scale of the regular hard currency auctions it runs in support of the lira, signalling sales worth at least six billion dollars by the end of January.