The Turkish lira hit a fresh record low today against the US dollar amid heightened geopolitical tensions and continued uncertainty surrounding the regime's response to the spiralling currency crisis.
One dollar bought as many as 5.4487 lira in morning trading today, as the Turkish currency fell by more than two per cent, before recovering slightly.
The Russian rouble also fell this morning in the aftermath of US sanctions against the nation in response to the poisoning of ex-spy Sergei Skripal on British soil.
Read more: Turkey's borrowing costs hit record high as investors lose faith
The rouble hit its lowest point in more than two years against the dollar, with a buck buying as many as 66.77 roubles in morning trading.
Turkey is also facing its own political struggles with the US over the jailing of an American citizen over allegations, which he denies, that he supported an attempted coup in 2016.
The lira has lost more than 40 per cent of its dollar value during the past year, having started 2018 at only 3.7 to the dollar. However, since then inflation has surged amid fears of political intervention in the nominally independent central bank.
Read more: Turkish lira drops to a new record low
Turkish President Recep Tayyip Erdogan has previously declared himself an "enemy of interest rates" and moved to take exclusive control of appointments to the central bank after gaining increased constitutional powers this summer.
The yield on a government bond maturing in February 2028 jumped to a high of 7.591 per cent today, according to data from Tradeweb, as investors continued to flee Turkish sovereign debt. Yields move inversely to prices.
Higher interest rates would likely help to combat inflation, which is running at more than 15 per cent over the past year, but economists also expect it to slow down economic growth in the country.
The lira is among the worst-performing currencies worldwide against the dollar this year, although it has been matched by the Argentine peso, which has lost more than half its value amid its own fiscal crisis. Emerging market economies have been put under pressure by the rising strength of the dollar, which makes dollar-denominated interest payments more onerous.
Read more: A victorious Erdogan must resist the allure of authoritarian rule
