Turkey’s lira rocketed back from record lows in volatile trading on Tuesday after Turkish President Tayyip Erdogan proposed measures to protect local currency savings against such swings.
The government has pledged to pay the difference between the value of savings in lira and equivalent dollar deposits. Some $1-billion was sold in markets after the announcement, Cakar said. Calculations by three bankers estimated around $1-1.5 billion in savings were converted to lira. Turkey’s five-year credit default swaps, the cost of insuring against sovereign default, jumped to 613 bps, the highest since May 2020, according to IHS Markit.
While the government called the lira’s rebound on Monday a major win on policy, economists have said Erdogan’s economic program based on low interest rates is reckless and expect inflation, currently above 21 per cent, to blow through 30 per cent next year.
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