Turkish Lira drops to record lows after Ankara court annuls 2023 leadership contest

USD/TRY rises after a slight decline in the previous day, reaching a record high of 45.7778 during the Asian hours on Friday. The pair appreciates as the Turkish Lira (TRY) drops due to political uncertainty that emerges after a top court ruling targeting the main opposition party. Turkey’s top economic policymakers will meet on Friday morning to discuss measures to stem market turbulence.

An Ankara appeals court has dealt a fresh blow to Turkey's opposition by annulling the 2023 leadership contest of the main opposition Republican People’s Party (CHP). The ruling effectively deposes the party's current leader, Özgür Özel, marking a significant escalation in the judicial challenges facing political rivals of President Recep Tayyip Erdoğan.

Additionally, the USD/TRY pair appreciates as the US Dollar (USD) receives support from rising odds of hawkish sentiment surrounding the Federal Reserve (Fed) policy stance. Higher energy prices threaten to feed into core US consumer prices and inflation expectations, which could potentially push the Fed to keep interest rates higher. Furthermore, a stronger US economic growth outlook is adding weight to the case for monetary tightening and boosting the Greenback.

Fed officials remain cautious as they evaluate whether to adjust short-term interest rates. While they are currently holding the federal funds rate steady, policymakers are moving away from the idea of rate cuts and are increasingly open to raising rates if inflation fails to cool down.

US President Donald Trump will swear in Kevin Warsh as the chair of the US Federal Reserve on Friday at the White House. The new chair succeeds Jerome Powell, whose term expired on Friday but who has continued to serve on a pro-tempore basis until the transition.