The Turkish lira weakened past 39.5 per USD in June, extending its depreciating momentum as the central bank continued to tune its tools for the controlled weakening of the currency. The TCMB maintained its benchmark interest rate at 46% in its June meeting, as expected by markets, to hold the 350bps rate increase from earlier in the second quarter. The increase was a response to the selloff in the lira following the arrest of Istanbul Mayor Ekrem Imamoglu, President Erdogan’s main political rival. The incident triggered the largest protests in over a decade and fueled fears of deepening political instability. In addition to a higher policy rate, the central bank unveiled a series of measures to reduce lira liquidity and increased the reserve requirement ratio for foreign liabilities.
