ANKARA: Turkey’s lira steadied on Wednesday and held gains from what is so far its best week two decades, after the currency charged back from record lows due to President Tayyip Erdogan’s new steps to guard Turks’ savings against such volatility.
The lira stood at 12.25 to the dollar at 05:39 GMT, from a close of 12.4 on Tuesday when it rose 6 per cent in a roller-coaster session.
On Monday, the lira first crashed 10 per cent then rallied to its largest daily gain ever, in record volatility.
The currency is still down some 40 per cent this year following a meltdown prompted by an aggressive monetary easing cycle engineered by Erdogan.
At its low on Monday, the currency was down some 60 per cent on the year.
More than half of locals’ savings are in foreign currencies and gold, according to central bank data, with confidence in the lira eroding after years of depreciation and bruised central bank credibility.
Erdogan introduced a series of measures on Monday that would shift the burden of a weakened currency to the Treasury and encourage
Turks to hold lira rather than dollars.
Analysts and bankers warned that if the nascent lira rally reverses and forces the government to cover depositors’ losses, it could further stoke inflation and weigh heavily on the deficit.
Wall Street bank JPMorgan estimated that any extra 12 per cent lira depreciation over the deposit interest rate could increase the budget deficit by around 1 per cent of GDP over a six month horizon.
— Reuters
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