The Turkish lira is plunging after an emergency rate hike

The Turkish lira continued sinking Thursday as investors blew off an emergency interest rate hike.

The lira was down 5.15% to 4.7858 versus the dollar at 8:00 a.m. ET, resuming a selloff that brought the currency to all-time lows Wednesday.

Turkey’s central bank raised rates sharply Wednesday by 300 basis points to 16.5%, temporarily propping up the currency.

President Recep Tayyip Erdogan, who is on the ballot for reelection next month, said last week in an interview with Bloomberg TV that he will step up his role in shaping economic policy. The comment raised concern about how much influence Erdogan, a self-declared “enemy” of interest rates, will have on the central bank.

“There is no disputing that the comments Turkish President Recep Tayyip Erdogan made last week regarding him having more influence in economic matters and monetary policy has been the catalyst behind the depression the Lira currently finds itself in,” said Jameel Ahmad, head of market and currency strategy at FXTM.

Erdogan said “financial discipline will continue” following the rate hike, according to Reuters, but markets seem to be remaining sceptical.

The central bank’s next policy meeting is scheduled for June 7.

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