ANKARA (Reuters) – Measures to protect Turkish lira bank deposits from depreciation amid a currency crisis have achieved their goal, President Tayyip Erdogan said on Wednesday, as the lira steadied following a volatile rebound from record lows this week.
The lira was 1.2% weaker at 12.55 to the dollar at 1000 GMT after strengthening sharply on Tuesday, although the currency is still about 40% down so far this year after aggressive monetary easing engineered by the president.
When the president announced the plan on Monday to protect lira deposits from further depreciation, the currency initially slumped to a record low of 18.40 to the dollar before rallying in volatile trading.
Erdogan’s new measures shift the burden of a weakened currency to the Treasury and encourage Turks to hold lira rather than dollars.
“The programme we announced to bring the exchange rate to a reasonable level within free-market economy rules has achieved its goal,” Erdogan told lawmakers from his ruling AK Party, as he again defended his push for lower interest rates.
“Some came out yesterday, making statements along the lines of ‘now is the perfect time to buy forex, this (currency crash)will continue from where it left off’. Their brains have been watered down,” he added.
More than half of savings held by Turks 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.
Analysts and bankers said if the lira rally reversed and forced the government to cover depositors’ losses, it could further stoke inflation and weigh heavily on the deficit.
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by : Reuters