The Turkish Lira has made numerous headlines, although not always positively. After months of losing value, it has now recovered 44% in a week. New state-backed market interventions and government promises seem to spark excitement, even if they might not be long-term solutions.
Turkish Lira Bounces Back
It is the season for Christmas miracles, and the Turkish Lira is no exception. While Turkey’s national currency has lost tremendous value lately, it seems a small rebound is in effect. The 44% spike in value is surprising, although its momentum is unlikely to last for long. Government promises and market interventions never provide long-term stability, certainly not when inflation runs rampant.
The Turkish Lira hit an all-time low of 18.4 per US Dollar earlier this week. Not entirely unexpected, as the currency has been on a downward spiral for months. Moreover, the strange interest rate cuts and overall inflation concerns do not spark much confidence. Turning that situation around will prove difficult, although these new measures by president Erdogan can offer some relief.
Turkey’s government will reimburse losses on converted lira deposits against foreign currencies through the new plan of action. The national treasury and central bank will cover these losses. An intriguing approach that can fuel the ongoing de-dollarization in the country. Like other regions, Turkey wants to reduce its reliance on the greenback or even remove it altogether.
The news has some interesting consequences. Over $900 million worth of hard currencies has been converted into Turkish Lira in just a few days. Most of those sales come from state banks supported by the central bank rather than individuals and companies. Moreover, the central bank’s net bgt5fv4roreign reserves dropped by $8.5 billion, bringing the total to $18 billion for December.