Matters just continue to go from bad to worse for the Turkish Lira.

The currency is in complete freefall and the outlook is still that there is an increased risk of further losses ahead. This is despite the Lira being crippled by meeting new historic lows on a near-daily basis as of late, a consequence of investors having an extreme lack of confidence in Turkish assets.

There is no disputing that the comments Turkish President Recep Tayyip Erdogan made last week regarding him having more influence in economic matters and monetary policy has been the catalyst behind the depression the Lira currently finds itself in. The issue is that it has scared investors away to such an extent, that it is difficult to imagine what buyers there are out there for the Turkish Lira. Erdogan effectively eliminated buyers from the market, and despite the currency on headline looking extremely oversold, the threat of central bank independence being under scrutiny is so high that it is preventing traders from wanting to even take a risk on buying the Lira at its current depressed levels.

The latest headline from yesterday is that Japanese investors turned their backs on Turkish assets, which is seen as the reason for the Lira plunging in excess of another 3% on Tuesday. The exodus is likely to continue, and it does appear to be only a matter of time before the Turkish Lira jumps towards 5 against the Dollar. With the acceleration in selling momentum for the Turkish Lira over the past week, it can’t be ruled out that the Lira could weaken to 5 against the Dollar before the end of the month.

We are still a month away from the upcoming June 24th elections in Turkey, but I do think that traders will be encouraged to price in as much negative news into Turkey as they can before the event. If Erdogan wins, as he is likely to do so, and does indicate that he will imminently instruct interest rates in Turkey to move lower as it is also suggested, there is a threat that there won’t be a ceiling to Turkish Lira weakness.

Although the events in markets like Turkey and Argentina might be looked at as idiosyncratic matters, we should also not underestimate the impact these could have on the general emerging market sentiment. I do not think it is a coincidence that the moves seen in the Turkish Lira on Tuesday have been mirrored by the majority of emerging market currencies, that are trading lower against the USD in the early hours of Wednesday trading.