The Turkish lira went down again

The Turkish lira depreciated by more than 2% on Wednesday, erasing some of its huge rise in the previous week as investors continued to have serious concerns about rising inflation.

The Turkish lira depreciated by more than 2% on Wednesday, erasing some of its huge rise in the previous week as investors continued to have serious concerns about rising inflation and the country’s central bank’s unorthodox policies, BNR reported.

Market participants do not appear to have responded to a 2022 Turkish Central Bank policy paper in which it said it would monitor foreign exchange market risks and do what is necessary to ensure that it runs smoothly. The central bank said it would use reserve requirements to support the pursuit of its price and financial stability targets, adding that negotiations to sign swap agreements with other central banks would continue.

Turkey’s currency depreciated by nearly 2.5% to 12.10 pounds per US dollar on Wednesday after rising more than 50% last week in response to state-sponsored billion-dollar market interventions and the government’s decision to cover of losses on exchange rates on certain deposits in Turkish lira.

Last week, President Recep Tayyip Erdogan presented an incentive for savers to convert foreign currency deposits into Turkish lira, under which the Ministry of Finance and the Central Bank will reimburse the losses incurred by each erosion of the value of the lira during the deposit period.

This led to the recovery of the local currency to its levels from mid-October around 10.50 pounds per US dollar, after on December 20 it collapsed to a record historic low of about 18.40 pounds per dollar.

Despite a solid recovery of the Turkish lira last week, it is still depreciating in 2021 by nearly 40% against the US currency.

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