Turkish lira slides almost 8% after intervention-driven surge
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[December 27, 2021] By
Daren Butler
ISTANBUL (Reuters) - The lira tumbled
almost 8% against the dollar on Monday amid persisting investor concern
over Turkey's monetary policy, having surged more than 50% last week
after billions of dollars of state-backed market interventions.
The lira was also supported last week by a government move to cover FX
losses on certain deposits.
It weakened to as low as 11.6 against the greenback on Monday before
trimming losses to trade at 11.35 by 0800 GMT.
"The main exchange rate resistance is at 11.45 and 12.0, with support
levels of 10.57 and 10.25," QNB Invest said in a daily bulletin.
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 35% 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.
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.
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A money changer counts Turkish lira banknotes at a currency exchange
office in Ankara, Turkey September 27, 2021. REUTERS/Cagla Gurdogan
The central bank sold $1.35 billion 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 23.8 billion 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 $163.7 billion of
hard currencies last Tuesday, virtually unchanged from Monday and Friday, when
the total was $163.8 billion.
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 14% since September, despite inflation that has risen to
more than 21%. Price rises are set to exceed 30% next year in part due to the
lira depreciation, economists predict.
The main BIST 100 stock index in Istanbul rose 2.6% on Monday morning.
(Additional reporting by Ebru Tuncay; Writing by Daren Butler; Editing by Vinay
Dwivedi and John Stonestreet)
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