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HomeGeneralAfter an intervention-driven spike, the Turkish currency is down about 8%

After an intervention-driven spike, the Turkish currency is down about 8%

The lira fell over 8% versus the dollar on Monday, owing to investor concerns about Turkey’s monetary policy. The currency had risen more than 50% in the previous week following billions of dollars in state-backed market interventions.

Last week, the lira was further bolstered by a government decision to compensate FX losses on some deposits. On Monday, it fell as low as 11.6 versus the dollar before recovering to trade at 11.35 by 0800 GMT.

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In a daily briefing, QNB Invest stated, “The primary exchange rate resistance is at 11.45 and 12.0, with support levels of 10.57 and 10.25.”

Last week’s rally brought the Turkish currency back to mid-November levels.

Last Monday, it had plunged to an all-time low of 18.4 per dollar, after a months-long slide due to fears of spiralling inflation driven by a succession of interest rate cuts engineered by President Tayyip Erdogan.

At current levels, the currency is still 35pc weaker than at the end of last year.

Erdogan unveiled late last Monday a scheme under which the Treasury and central bank would reimburse losses on converted lira deposits against foreign currencies, sparking the lira’s biggest intraday rally. read more

Turks did not sell dollars in large quantities on Monday and Tuesday of last week, according to official data that suggested they had played little role in the gains. State interventions, meanwhile, cost the central bank more than $8 billion last week, according to traders’ calculations.

The central bank sold $1.35bn in direct forex interventions on Dec. 2-3 to support the lira when it stood around 13.5 per dollar, according to data.

In an interview with broadcaster AHaber, Erdogan said Turks showed confidence in the local currency and deposits increased by 23.8bn lira after the anti-dollarisation plan announcement.

But data from the BDDK banking watchdog showed that after heavy accumulation of dollars the previous week, Turkish individual depositors held $163.7bn of hard currencies last Tuesday, virtually unchanged from Monday and Friday when the total was $163.8bn.

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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.

Under pressure from Erdogan, the central bank has slashed its policy rates by 500 basis points to 14pc since September, despite inflation that has risen to more than 21pc. Price rises are set to exceed 30pc next year in part due to the lira depreciation, economists predict.

The main BIST 100 stock index in Istanbul rose 2.6pc on Monday morning.

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