Lira hits a historic low against euro and dollar

Turkish lira slumped to a record low against the dollar after Trump’s decision to impose trade tariffs on up to $60 billion of Chinese products.

Lira has been the worst performer in emerging markets over the past month and last night it dropped to 4.0375 per dollar in Asia trading. It fell 0.6 percent to 3.9686 as of 9:43 a.m. in Istanbul.

For a long time Turkey’s widening current account deficit, exacerbated by economic stimulus measures by President Recep Tayyip Erdogan's government is sending negative signals to the economic markets.

Economists are concerned that the currency’s declines will feed into inflation and then back into the exchange rate. The concerns are being exacerbated by the increasing power of Erdoğan over economic decision-making.

Ferhan Salman, Turkey economist at Bank of America Merrill Lynch, said on Wednesday that the lira may be overvalued by 15 percent on a trade-adjusted basis, according to the FT.