The Turkish lira reached a new record low on Tuesday morning as coalition talks between Turkey's Prime Minister and leader of the governing Justice and Development Party (AK Party) Ahmet Davutoglu and chair of the Nationalist Movement Party (MHP), Devlet Bahceli ended the day without an agreement on Monday.
The dollar to lira exchange rate opened at 2.87, gaining 0.3 percent in early trade as an early election is now more likely than a possible formation of a coalition government.
The meeting with MHP came after negotiation talks between the AK party and the main opposition Republican People’s Party (CHP) failed to meet ends over the formation of a coalition government on Thursday.
With a deadline looming to form a government by next week and no progression in sight, a temporary government will be formed by Turkish President Recep Tayyip Erdogan. The next step will be for parliament to hold a new election.
Economists are now eyeing the decision that will come out of the Turkish Central Bank's monetary policy committee at 2:00 pm local time (1100 GMT) on Tuesday, as analysts believe an early election could devalue the Turkish lira further against the dollar.
However, Turkish Economy Minister Nihat Zeybekci implied that no further intervention is needed to the lira and interest rates will remain stable.