Turkish lira continued its downward trend on Thursday

The Turkish Lira weakened 0.8 per cent to a record low on Thursday, extending losses after a heavy selloff in the previous session that was seen as a sign of the government easing controls on the foreign exchange market.

The currency later recouped some of its losses, standing at 23.33 against the dollar by 0542 GMT, after touching a record low of 23.39 overnight during illiquid trading hours.

On Wednesday, the lira had plunged 7.2 per cent, recording the biggest intraday drop since a historic crash in late 2021, after the central bank slashed rates in the face of rising inflation as part of President Tayyip Erdogan’s policies.

Economists said the lira’s sharp drop was a signal that Ankara was moving away from state controls towards a freely traded currency, albeit there are numerous regulations and measures that are yet to be rolled back.

The currency is nearing levels where it does not need to be defended through the use of reserves, traders said, adding that they do not expect the lira to depreciate on Thursday as much as it did a day earlier.

“There is no air of panic in the markets as in previous times when there were such high losses. On the contrary, there is a perspective of normalisation, which is important,” a forex trader said.