Turkish currency dips as much as 17% in Monday trading on diverging views on interest rates

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Financial markets reacted to the firing of the country’s respected Central Bank chief by running away from the Lira on early Monday trading, and the currency was near its all-time low against the dollar, slicing through key resistance levels.

President Recep Tayyip Erdoğan holds that high interest rates cause inflation, whereas the Quantity Theory of money that led fired governor Naci Agbal to raise interest rates - a fundamental of inflation control around the world -  holds that a growing money supply, which is increased by lower rates, increases inflation.

By Milan Sime Martinic