Turkish Lira Plummeted Amid Intensified Dollar Shortage

Turkish lira's exchange rate plunged to a record low of 7.2340 against US dollar.

Faced with increased inflation, rising unemployment and slow economic growth, the lira is under increasing pressure. The Turkish central bank has withdrawn millions of dollars from foreign exchange reserves this year to buy lira and support the exchange rate of the lira against the dollar, significantly reducing the country's net forex reserves from US$ 40 billion at the beginning of the year to just about US$ 25 billion.

Nevertheless, the lira has fallen by 17% this year. Before the coronavirus outbreak, the Turkish economy was already under pressure. Now, after struggling with nearly two years of currency depreciation, high debt and rapidly disappearing foreign exchange reserves, the country with a population of 82 million is in a particularly bad situation and remains vulnerable to the shock of the pandemic. The country's unemployment rate was close to 14% in January, before the economy was even affected by the coronavirus. In the near future, Turkey's massive tourism industry will also face destruction.

Due to the impact of the epidemic, global economic activities and trade have declined significantly. Forex reserves of emerging market countries are shrinking inevitably as they face tremendous pressure. Driven by risk aversion sentiments and similar demands, the global dollar shortage is further intensifying.