Amid political tensions and rising inflation worries around the world, the Turkish lira is exploring new record lows.

If it had already left its low of 10.19 lira against the euro, marked in November, in mid-May - the currency market valued the euro at 10.44 lira on Friday lunchtime - the dollar now followed suit.

On Friday morning 8.59 lira had to be paid for the US currency, more than ever before.

In the November crisis, a peak of 8.58 lira was asked for one dollar.

Around noon the lira rose again slightly.

Andreas Mihm

Business correspondent for Austria, East-Central, Southeastern Europe and Turkey based in Vienna.

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    The crisis in November was defused in terms of monetary policy when President Recep Tayyip Erdogan had appointed a new central bank governor.

    The predecessor Naci Agbal had won the confidence of the markets with clear language and actions, including raising the key interest rate to 19 percent to combat inflation.

    But Erdogan fears that high interest rates would weaken economic growth and replaced Agbal at the end of March with Sahap Kavcioglu, who stands for a less restrictive monetary policy stance.

    Further changes in the Central Bank Council, most recently this week, followed.

    Since March, the lira has lost 13 percent of its value against the dollar.

    Calculated over a year it is 25 percent, compared to the euro even 38 percent.

    Is there a new lira crisis looming?

    Any surge in devaluation could trigger a new lira crisis if it resulted in higher inflation, writes Commerzbank analyst Tatha Ghose.

    Because the central bank cannot counter higher inflation, "because it cannot" credibly "raise interest rates and thus push the well-known 'lira spiral' again".

    The central bank council has left key interest rates unchanged so far, even under new leadership, but the rate of currency devaluation is increasing from month to month.

    In April, the cost of living rose by 17.1 percent compared to the previous year, and unemployment also remains high in the pandemic despite government bans on dismissal.

    The real interest rate falls as a result, it becomes less attractive to invest foreign currency in lira.

    Because of its high imports, which exceed exports, the country needs a steady flow of foreign currency.

    Price increases on imported foreign goods such as energy resources are further fueling inflation.

    Hope in tourism

    A tough lockdown in the past few weeks had hit the local economy, even if the industry was largely able to continue to operate. Meanwhile, tourism, which represents a seventh of the gross domestic product, has largely collapsed. Guests from the most important travel countries Russia, Germany and Great Britain are missing. Now one hopes in Ankara that the summer season does not fail again. The resumption of tourist flights from Russia is expected from mid-June. A high-ranking delegation from Ankara only visited the federal government in Berlin on Thursday and promoted the resumption of travel business soon.

    Domestic political entanglements such as mafia allegations against the interior minister are damaging the Erdogan government. According to various polls, he himself would not win a majority in elections. Foreign policy disputes with America and the EU have not been resolved. Added to this are rising US yields and investors worldwide who are becoming more cautious about riskier investments and emerging market currencies.