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Turkish lira tumbles day after Erdogan's re-election

Re-elected President Recep Tayyip Erdoğan took the stage in front of supporters at the presidential palace after winning reelection in a runoff in Ankara, Turkey, on Sunday. The lira dropped on Monday, a day after his election. Photo by Turkish President Press Office/UPI
Re-elected President Recep Tayyip Erdoğan took the stage in front of supporters at the presidential palace after winning reelection in a runoff in Ankara, Turkey, on Sunday. The lira dropped on Monday, a day after his election. Photo by Turkish President Press Office/UPI | License Photo

May 29 (UPI) -- Turkey's currency, the lira, tumbled to new lows against the U.S. dollar on Monday, the day after President Recep Tayyip Erdogan won a new five-year term, presenting a new challenge to his embattled rule.

The lira, which had already lost 90% of its value over the past 10 years, slipped to 20.065 to the dollar during morning trading in Europe, beating a record low previously set on Friday.

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Erdogan won a tight race Sunday over opposition leader Kemal Kilicdaroglu in Turkey's runoff election after just missing winning 50% of the vote in the general election earlier this month. The election continued Erdogan's entrenchment in power. He has been president since 2014 and its prime minister from 2003 to 2014.

Erdogan had alienated foreign investors with an "unorthodox" policy of ultra-low interest rates mixed with aggressive state intervention in the markets. The drop suggests that investors are betting Erdogan's current fiscal path is unsustainable.

"An Erdogan win offers no comfort for any foreign investor," said Hasnain Malik, head of equity research at Tellimer, according to CNN. "Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy."

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Wells Fargo's Emerging Markets Economist and FX Strategist Brendan McKenna told CNBC those uneasy feelings about Turkey's economy are likely to last into next year.

"We have a pretty pessimistic outlook on the Turkish lira as a result of Erdogan retaining office after the election," he said.

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