Turkish currency hits an all-time low

Turkey's lira is the worst-performing emerging market currency this year and fell further against the dollar on Thursday after President Erdogan sacked three members of the central bank's rate-setting committee.

The lira has hit a series of record lows this week and, on Thursday, the US dollar gained 1.1% against the lira to TRY9.1804.

Turkey's beleaguered currency has lost 19% this year, making it the worst-performing emerging market currency tracked by Bloomberg.

Thursday's losses followed the sacking by President Tayyip Erdogan of a trio of central bank governors – including two deputy chairpersons.  

Erdogan has been at odds with the central bank many times over – having appointed Sahap Kavcioglu as governor in March, following his sacking of the previous incumbent. Kavcioglu is the third governor in three years.

Meanwhile, the country's Treasury and Finance Ministry said on Wednesday that currency dealers in the country would be required to disclose the identities of their clients, a practice aimed to “reduce informality, increase the level of institutionalisation and ensure compliance with international regulations”.

Losses for the lira have accelerated since the central bank announced a surprise rate cut in September, cutting its key policy rate to 18% from 19%.

“Given the political pressure on the institution, we have pencilled in a further 600bp of rate cuts by the middle of next year,” said Jason Turvey, senior emerging market economist at Capital Economics.

"Against that backdrop, we estimate the lira to drop to TRY10.50 by the end of 2022, with the risks skewed towards even greater declines," he said.