Turkey's currency falls to historic low as Erdogan arrests his main rival

The Turkish lira has hit a historic low against the US dollar. The USD/TRY exchange rate on the international Forex market surged by 11.99% at the start of trading on March 19, reaching 41.1 lira per dollar. This marks the first time the dollar has exceeded 41 lira.

Turkey's assets are declining amid the police detention of President Recep Tayyip Erdoğan's rival, Bloomberg reports.

Shares of Turkish companies also dropped, while the yield on 10-year government bonds rose to its highest level this year. The Borsa Istanbul 100 (BIST 100) index fell by 6.9%, triggering a halt in trading. After trading resumed, the decline narrowed, with the index down 5.5% as of 11:32 AM Moscow time. The lira's depreciation also eased, with the exchange rate improving to 39.25 lira per dollar.

Political events typically impact Turkey's stock market, as it is dominated by local investors who are sensitive to such developments. Turkish investors hold approximately 62.5% of the country's stocks.

Erdoğan's Main Rival Arrested on Corruption Charges

Istanbul Mayor Ekrem İmamoğlu was detained at his home on Wednesday, March 19, according to CNNTurk. His arrest came a day after authorities annulled his university diploma, a move that could prevent him from running in the next presidential election. İmamoğlu, a leader of the opposition Republican People's Party (CHP), is considered Erdoğan's main opponent. CHP, the second-largest party in Turkey's parliament, holds 128 out of 600 seats.

Leader of Nationalist Good Party Declares Crisis

Musavat Dervişoğlu, leader of the nationalist İYİ Party (Good Party), issued a strong statement:

"This is a coup. As of today, the right to vote and be elected, freedom, democracy, law, and constitutional rights in Turkey have been suspended. If Erdoğan runs again, the entire opposition must protest the elections. We will stand tall, like Atatürk."

İmamoğlu has led Istanbul since 2019. Several investigations against him were launched earlier this year, including one related to "influencing an investigation, an expert, or a witness," after he claimed that "a bought expert" had fabricated reports against CHP and its representatives in local government. Another case involves his comments about Istanbul's prosecutor general and his family.

Amid the developments, Istanbul authorities banned all mass gatherings and rallies for four days, Reuters reports. Additionally, some social media platforms and messaging apps, including X (formerly Twitter, blocked in Russia), WhatsApp, and TikTok, were temporarily restricted in Turkey, according to Bloomberg.

Municipal elections in Turkey last year saw the opposition defeating Erdoğan's candidates in Ankara and Istanbul. Erdoğan vowed to regain control over Istanbul, Turkey's economic and cultural hub.

The next presidential election is scheduled for 2028. Imamoğlu was set to be nominated as CHP's presidential candidate on Sunday, March 23.

Turkey's Central Bank Cuts Interest Rate for Third Consecutive Time-to 42.5%

"This is a system shock," said Nick Rees, head of research at Monex Europe, commenting on the lira's collapse. He noted that Turkey had recently shown signs of greater stability, both economically and politically. Rees added that the recent call by Kurdistan Workers' Party (PKK) leader Abdullah Öcalan to lay down arms indicated a move toward de-escalation, but the arrests of opposition figures contradict this trend. The market had grown more confident, but now sentiment has shifted dramatically, leading traders to reassess Turkey's political risk premium and triggering a sharp sell-off of the lira.

At its last meeting in March, Turkey's central bank cut interest rates for the third consecutive time, bringing them down to 42.5%. This came after eight meetings where the rate was held at 50% to combat high inflation. The next central bank meeting is scheduled for April 17.

Details

The lira (Turkish: Türk lirası; sign: ₺; ISO 4217 code: TRY; abbreviation: TL) is the official currency of Turkey and the Turkish Republic of Northern Cyprus. One lira is divided into one hundred kuruş. The current lira is the Second Turkish lira, having succeded the first Turkish lira in 2005 which in turn succeded the Ottoman lira in 1923. Since 2018 the Turkish lira has been in crisis, having plummeted in value following Turkish president Erdogan's economic and political policies.

Ekrem İmamoğlu (Turkish: [ecˈɾæm iˈmamoːɫu]; born 4 June 1970) is a Turkish businessman, real estate developer, and social democratic politician serving as the 32nd Mayor of Istanbul. He was first elected with 4.1 million votes and won with a margin of 13 thousand votes against his AKP opponent in the March 2019 mayoral election as the joint Nation Alliance candidate of the Republican People's Party (CHP) and the Good Party. He served only from 17 April 2019 until 6 May 2019, when the election was annulled. He was then reelected in a renewed election on 23 June 2019 by an even larger margin of 800,000 votes. He ran for the office again in the 2024 Istanbul mayoral elections in which he won by approximately a 50 percent majority, securing another 5-year term. He had previously been the Mayor of Beylikdüzü, a western district of Istanbul, between 2014 and 2019.