Turkish lira continues dramatic nosedive

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Turkey's lira has nosedived once again after President Tayyip Erdogan defended recent rate cuts and vowed to win his "economic war of independence", despite widespread criticism and pleas to reverse course.

The lira tumbled as far as 13.45 to the US dollar on Tuesday, plumbing record lows for an 11th straight session, before trimming some of those losses to close 10.2 per cent lower at 12.7015.

The currency has lost 42 per cent of its value this year, including a more than 22 per cent decline since the beginning of last week.

Erdogan has applied pressure on the central bank to pivot to an aggressive easing cycle that aims, he says, to boost exports, investment and jobs - even as inflation soars to near 20 per cent and the currency depreciation accelerates, eating deeply into earnings.

Many economists called the rate cuts reckless while opposition politicians appealed for immediate elections.

After a meeting between Erdogan and central bank governor Sahap Kavcioglu, the bank issued a statement saying the sell-off was "unrealistic and completely detached" from economic fundamentals.

There was no hint at an intervention to stem the meltdown.

The central bank said it could only do so under certain conditions in "excessive volatility".

Former bank deputy governor Semih Tumen, who was dismissed last month in the latest round of Erdogan's rapid leadership overhaul, called for an immediate return to policies which protect the lira's value.

"This irrational experiment which has no chance of success must be abandoned immediately and we must return to quality policies which protect the Turkish lira's value and the prosperity of the Turkish people," he said on Twitter.

Tuesday's slide was the lira's largest since the height of a currency crisis in 2018 that led to a sharp recession, and brought on three years of sub-par economic growth and double-digit inflation.

The central bank has slashed rates by a total of 400 points since September, as virtually all other central banks have begun tightening against rising inflation, or preparing to do so.

The lira has been by far the worst-performing currency globally this year due mostly to what some analysts have called a premature economic "experiment" by Erdogan, who has ruled Turkey for nearly two decades.

Erdogan's AK Party is sliding in opinion polls ahead of elections scheduled for no later than mid-2023, reflecting sharply higher costs of living.

"Prices are rising too fast. I don't want to buy certain products because they've got too expensive," said Kaan Acar, a hotel executive.

"The fault lies with President Erdogan, the AKP government, and those who for years turned a blind eye and supported them."

Erdogan defended the policy late on Monday and said high rates would not lower inflation, an unorthodox view he has repeated for years.

"I reject policies that will contract our country, weaken it, condemn our people to unemployment, hunger and poverty," he said, prompting a late-day slide in the lira.

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