ISTANBUL: The lira skidded to record lows against the dollar, euro and pound on Monday amid concern that Turkey could get more involved in a fast-escalating conflict in the Caucasus, despite last week's surprise rate hike meant to support the currency.
The Turkish lira slid 2% against the dollar and was on track for its worst day since early August, when the latest bout of selling began hitting the currency that has shed half its value in less than three years.
The currency weakened as far as 9.1416 against the euro and 10.0974 against the British pound.
The lira was also hit by dollar strength, reaching a record low of 7.8325 by 1231 GMT - a decline of some 24% from the end of last year.
The currency has been among the worst performers this year on worries about Turkey's depleted forex reserves and sharply negative real interest rates, and was now being hit by the growing geopolitical concerns.
The selloff erased a rally late last week when Turkey's central bank unexpectedly hiked interest rates by 200 basis points to 10.25%, tightening policy for the first time in two years to stabilize the lira and address inflation.
But analysts who applauded the monetary policy pivot said the currency came under new pressure after heavy fire between Armenia and Azerbaijan, marking their worst clashes since 2016. Turkey said it supports Azerbaijan.
A treasury specialist at a Turkish bank said the moves by both the central bank and banking watchdog could brighten the overall dim investor sentiment around the lira - but they were muted by the geopolitical tension.
"We think the currency would have hit 8 versus the dollar without these steps due to tensions in neighbouring Armenia and Azerbaijan," the specialist said.
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