The Turkish lira weakened to a record low of 20 against the dollar, ahead of this weekend’s presidential election runoff which will decide whether President Tayyip Erdogan extends his rule into a third decade.

The lira touched 20.00 against the US currency on Friday at 0508 GMT and continued to hover near that level. It closed at 19.8695 on Thursday and has weakened 6.4 per cent so far this year. Turkey’s sovereign dollar bonds and equities have plunged, while the cost of insuring exposure to Turkish debt has spiked since the first round of the presidential election on May 14.

On Thursday evening, Erdogan said in an interview that Gulf states recently sent funding to Turkey, briefly helping relieve the central bank and markets, and he intends to meet and thank their leaders after Sunday’s runoff.

Erdogan was well ahead of his main rival Kemal Kilicdaroglu in the first round and fell just short of the more than 50 per cent support he needed to avoid going to Sunday’s runoff.

Forex demand has surged over the election period on expectations that the lira will further extend its declines, having lost 44 per cent of its value in 2021 and 30 per cent in 2022.

The lira’s losses this year have largely come since devastating earthquakes in February, which killed more than 50,000 people and caused widespread devastation in a large region of southern Turkey. The lira has weakened 2.1 per cent since the May 14 vote.

The Turkish central bank’s net forex reserves dropped into negative territory for the first time since 2002, standing at $-151.3 million on May 19, official data showed on Thursday.