Turkish lira hits record low

ISTANBUL — Turkey's lira on Thursday set a new record low against the US dollar as investors worried about the government's economic policies and dollar reserves appeared to be running low.

The lira was trading at 7.28 against the greenback around 10:30 GMT, suffering a loss of more than 3 per cent since the start of the day -- the lowest since May when it reached a then-record low of 7.24.

The currency also recorded its lowest level against the euro, trading near 8.60 against the European currency at 10:30 GMT.

The new fall comes as markets worry about a meltdown in the foreign currency reserves at Turkey's central bank, which appears to have spent lavishly in recent months to prop up the national currency.

State banks were also pushed to sell dollars to help the weakening lira.

An economic slowdown due to the novel coronavirus pandemic hit Turkey hard just as it was trying to recover from its first recession in a decade.

Turkey's central bank -- which is nominally independent but often the target of government pressure -- has lowered interest rates to 8.25 per cent from 24 per cent since July last year, to the dismay of many foreign investors.

President Recep Tayyip Erdogan has repeatedly called for lower interest rates to promote growth at the expense of reining in inflation.

He once called high rates the "mother and father of all evil."

July's annual inflation rate was 11.76 per cent, down from 12.62 per cent in June, according to official data, but still well above the government's own year-end inflation target of 8.5 per cent.

The Turkish economy was struck by a currency crisis in 2018 over escalating tensions with its NATO ally the United States, which propelled emergency rate hikes by the central bank.