October currency review

Five years ago, one euro was worth 3.5 Turkish lira; now it is worth 11. The lira's relentless depreciation accelerated again in October, and once more it was largely due to actions of President Erdogan. First, he pressured the central bank to cut interest rates by 2% (following a 1% cut the month before) despite annual inflation having risen to 19.6%. (Economic orthodoxy suggests monetary policy should be tightened, not loosened, to contain inflation.) Then, he sacked three senior central bank employees, one because he had dared to vote against the interest rate cut. Finally, the president threatened to expel 10 foreign ambassadors from Turkey because their leaders had collaborated in writing a letter complaining about human rights abuses. While Erdogan quickly backed down on this, the damage had already been done and his withdrawal of the threat failed to prevent further exchange rate losses at the end of the month.

The biggest faller in October was, however, the Zimbabwe dollar. We predicted in September's currency review an imminent devaluation, due to alarming divergence between official and black-market rates, and the Reserve Bank of Zimbabwe did not disappoint, moving the exchange rate against the euro from EUR 1 / ZWL 101 to ZWL 112 during the month.

The strongest currency in the world in October was the Liberian dollar, which gained 10% against the euro. A big new mining investment deal was the main factor, although the country has also seen surging export volumes of its primary products, including iron ore, gold, rubber and cocoa.

Finally, here is this month's selected currency movements table: