Turkish lira dropped almost by eight percentage points against the dollar on Monday amid persisting investor concerns over Turkey’s monetary policy, following last week’s driven surge of state-backed market interventions, Reuters said.
It fell to as low as 11.6 against the dollar on Monday morning, before trimming losses to trade at 11.35 by 08:00 a.m., it said.
The central bank has slashed interest rates by 5 percentage points since September, acting on the orders of President Recep Tayyip Erdoğan, who said Islamic principles dictate that his government lowers interest rates.
Erdoğan announced a government plan on Dec.20, to recompense lira deposit holders for currency losses, after the currency hit a record low of 18.36 per dollar on the same day. The lira rallied strongly.
The government later introduced the plan to make up for the losses, should the currency’s declines exceed the central bank’s benchmark interest rate of 14 percent.
At current levels, the currency is still 35 percent weaker than at the end of last year, Reuters said.
Erdoğan said Turks showed confidence in the local currency and deposits increased by 23.8 billion lira after the anti-dollarisation plan announcement, in an interview with pro-government broadcaster AHaber.
But data from the BDDK banking watchdog showed that after heavy accumulation of dollars the previous week, Turkish individual depositors held $163.7 billion of hard currencies last Tuesday, virtually unchanged from Monday and Friday, when the total was $163.8 billion, Reuters reported.
The lira got a big boost last week from what traders and economists called backdoor dollar sales by state banks, supported by the central bank, it said.
Ahval